-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, So68Sphpj3VOYC6+u03gTqKtutrYO5lj4l4cM5bI+UxV3zokkJLW5Ofk+tL2UHgd 7rsfxkWFbCR/0R5SKuT1kQ== 0000950123-01-500624.txt : 20010411 0000950123-01-500624.hdr.sgml : 20010411 ACCESSION NUMBER: 0000950123-01-500624 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010410 EFFECTIVENESS DATE: 20010501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL CENTRAL INDEX KEY: 0000858997 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-40161 FILM NUMBER: 1599186 BUSINESS ADDRESS: STREET 1: 1 MADISON AVE STREET 2: METROPOLITAN LIFE INSURANCE CO CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2125788717 MAIL ADDRESS: STREET 1: 1 MADISON AVENUE STREET 2: LAW DEPARTMENT AREA 7 G CITY: NEW YORK STATE: NY ZIP: 10010 485BPOS 1 y46215e485bpos.txt METROPOLITAN LIFE SEPARATE ACCOUNT UL 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 2001 REGISTRATION NO. 333-40161 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ POST-EFFECTIVE AMENDMENT NO. 4 To FORM S-6 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ------------------------ METROPOLITAN LIFE SEPARATE ACCOUNT UL (EXACT NAME OF TRUST) METROPOLITAN LIFE INSURANCE COMPANY (NAME OF DEPOSITOR) 1 Madison Avenue New York, New York 10010 (COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ GARY A. BELLER, ESQ. Senior Executive Vice-President and General Counsel Metropolitan Life Insurance Company 1 Madison Avenue New York, New York 10010 (NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE) ------------------------ Copies to: GARY O. COHEN, ESQ. and THOMAS C. LAUERMAN, ESQ. Foley & Lardner 3000 K Street, N.W. Washington, D.C. 20007 ------------------------ Title and amount of securities being offered: An indefinite amount of separate account interests under variable additional insurance options. AMOUNT OF FILING FEE: None required. It is proposed that the filing will become effective (check appropriate box) [ ] Immediately upon filing pursuant to paragraph (b) [X] On May 1, 2001 pursuant to paragraph (b) [ ] On (date) pursuant to paragraph (a)(1) of Rule 485 [ ] On (date), pursuant to paragraph (a) of Rule 485 ----------------------------- Registrant elects to be governed by Rule 6e-3(T)(B) under the Investment Company Act of 1940 with respect to variable additional insurance options. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 METROPOLITAN LIFE SEPARATE ACCOUNT UL METROPOLITAN LIFE INSURANCE COMPANY CROSS-REFERENCE TABLE
ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS ----------- ---------------------- 1.................................... Cover Page 2.................................... METLIFE 3.................................... Inapplicable 4.................................... SALES AND ADMINISTRATION OF THE POLICIES; METLIFE; SUMMARY 5, 6, 7.............................. SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC. 8.................................... FINANCIAL STATEMENTS 9.................................... Inapplicable 10(a)................................ OTHER POLICY PROVISIONS; EQUITY OPTIONS RIGHTS 10(c), 10(d)......................... SUMMARY; EQUITY OPTIONS BENEFITS; EQUITY OPTIONS RIGHTS; EQUITY OPTIONS PREMIUMS; OTHER POLICY PROVISIONS 10(e)................................ EQUITY OPTIONS PREMIUMS--Equity Options Termination and Reinstatement 10(f)................................ VOTING RIGHTS 10(g)(1)-(3), 10(h)(1)-(3)........... RIGHTS WE RESERVE 10(g)(4), 10(h)(4)................... Inapplicable 10(i)................................ EQUITY OPTIONS BENEFITS; EQUITY OPTIONS PREMIUMS; ISSUING EQUITY OPTIONS 11................................... SUMMARY; SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND, INC. 12(a)................................ Cover Page 12(b), 12(e)......................... Inapplicable 12(c), 12(d)......................... SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND, INC. 13(a), 13(b), 13(c), 13(d)........... SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND, INC.; OTHER POLICY PROVISIONS; POLICY RIGHTS; SUMMARY--Table of Charges and Expenses; EQUITY OPTIONS CHARGES AND DEDUCTIONS 13(e)................................ SALES AND ADMINISTRATION OF THE POLICIES 13(f), 13(g)......................... Inapplicable 14................................... EQUITY OPTIONS PREMIUMS; SALES AND ADMINISTRATION OF THE POLICIES 15................................... EQUITY OPTIONS PAYMENTS 16................................... SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND INC. 17(a), 17(b)......................... Captions referenced under Items 10(c), 10(d), 10(e) and 10(i) above 17(c)................................ Inapplicable 18(a), 18(c)......................... SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND INC. 18(b), 18(d)......................... Inapplicable
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ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS ----------- ---------------------- 19................................... SALES AND ADMINISTRATION OF THE POLICIES; VOTING RIGHTS; REPORTS 20(a), 20(b)......................... RIGHTS WE RESERVE; SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND INC. 20(c), 20(d), 20(e), 20(f)........... Inapplicable 21(a), 21(b)......................... EQUITY OPTIONS RIGHTS--Loan Privileges; EQUITY OPTIONS PREMIUMS; OTHER POLICY PROVISIONS 21(c), 22............................ Inapplicable 23................................... SALES AND ADMINISTRATION OF THE POLICIES 24................................... EQUITY OPTIONS PREMIUMS; OTHER POLICY PROVISIONS 25................................... METLIFE 26................................... Inapplicable 27................................... METLIFE 28................................... MANAGEMENT 29................................... Inapplicable 30, 31, 32, 33, 34................... Inapplicable 35................................... GETTING MORE INFORMATION 36, 37............................... Inapplicable 38................................... SALES AND ADMINISTRATION OF THE POLICIES 39................................... METLIFE; SALES AND ADMINISTRATION OF THE POLICIES 40(a)................................ Inapplicable 40(b)................................ SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND INC. 41(a)................................ METLIFE; SALES AND ADMINISTRATION OF THE POLICIES 41(b), 41(c), 42, 43................. Inapplicable 44(a)................................ SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND INC.; EQUITY OPTIONS BENEFITS--Equity Options Cash Value 44(b)................................ Inapplicable 44(c)................................ EQUITY OPTIONS CHARGES AND DEDUCTIONS 45................................... Inapplicable 46................................... Captions referenced under Item 44 above 47................................... Captions referenced under Items 10(c) and 16 above 48, 49............................... Inapplicable 50................................... SEPARATE ACCOUNT UL; METROPOLITAN SERIES FUND INC. 51(a), 51(b)......................... METLIFE; SUMMARY; EQUITY OPTIONS BENEFITS; EQUITY OPTIONS RIGHTS 51(c), 51(d), 51(e).................. Captions referenced under Item 10(i) above 51(f)................................ EQUITY OPTIONS PREMIUMS--Equity Options Termination and Reinstatement
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ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS ----------- ---------------------- 51(g)................................ Captions referenced under Items 10(i) and 13 above 51(h), 51(j)......................... Inapplicable 51(i)................................ SALES AND ADMINISTRATION OF THE POLICIES 52(a), 52(c)......................... RIGHTS WE RESERVE 52(b), 52(d)......................... Inapplicable 53(a)................................ FEDERAL TAX MATTERS 53(b), 54 through 58................. Inapplicable 59................................... FINANCIAL STATEMENTS
iii 5 MetLife's EQUITY OPTIONS May 1, 2001 _________________________________________________________________________ Equity Additions(TM) Equity Enricher(SM) EQUITY OPTIONS Equity Options Prospectuses "Equity Additions - Equity Enricher" -- Screened in throughout page PROSPECTUSES FOR - - Variable Additional Insurance Dividend Option and Variable Additional Benefits Rider Issued by Metropolitan Life Insurance Company - - Metropolitan Series Fund, Inc. METLIFE(R) 6 E Q U I T Y O P T I O N S PROSPECTUS FOR THE EQUITY OPTIONS ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY ("METLIFE") MAY 1, 2001 The Equity Options are the Equity Additions and the Equity Enricher. Each option is designed to supplement benefits available under your MetLife fixed benefit life insurance policy. Equity Options are designed to provide: - - Life insurance coverage - - A death benefit - - A conditional guaranteed minimum death benefit - - A funding option for allocating premium payments to the available investment divisions of Metropolitan Life Separate Account UL. A word about risk: This Prospectus discusses the risks associated with purchasing the Equity Options. The Metropolitan Series Fund, Inc. (the "Fund") prospectus discusses the risks associated with investment in the Fund. The Fund prospectus is being provided to you in addition to this Prospectus, because each available investment division invests in a corresponding portfolio of the Fund. This Prospectus is not valid unless you also receive or have received a current Fund prospectus. The purchase of the Equity Options involves risk. You could lose money, as well as the benefits provided under the Equity Options. How to learn more: Before selecting an Equity Option, read the information in this Prospectus and in the prospectus for the Fund. Keep the prospectuses for future reference. ---------------------------- Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. This Prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Interests in the Separate Account and the Portfolios are not deposits or obligations of, or insured or guaranteed by, the U.S. Government, any bank or other depository institution including the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other agency or entity or person. Any representation otherwise is a criminal offense. We do not authorize any representations about this offering other than as contained in this Prospectus or its supplements or in our authorized supplemental sales material. Metropolitan Life Insurance Company 1 Madison Avenue, New York, New York 10010 (800) 638-5000 7
PAGE IN THIS SUBJECT PROSPECTUS - ------- ---------- Summary........................................... 2 MetLife........................................... 5 Separate Account UL............................... 6 Metropolitan Series Fund, Inc..................... 6 The Base Policy and Benefit Options............... 7 Issuing Equity Options............................ 8 Equity Options Benefits........................... 9 Equity Options Rights............................. 12 Equity Options Premiums........................... 15 Equity Options Charges and Deductions............. 18 Net Single Premium................................ 19 Federal Tax Matters............................... 19 Showing Performance............................... 21 Rights We Reserve................................. 22 Other Policy Provisions........................... 22 Sales and Administration of the Policies.......... 23 Voting Rights..................................... 24 Reports........................................... 25 Illustration of Equity Options Benefits........... 25 Getting More Information.......................... 25 Legal, Accounting and Actuarial Matters........... 26 Management........................................ 27 Financial Statements..............................
SUMMARY This summary gives an overview of the Equity Options and is qualified by the more detailed information in the balance of this Prospectus, the Equity Options riders, and the relevant fixed benefit life insurance policy. EQUITY OPTIONS MetLife issues the Equity Options as optional benefits to a fixed benefit life insurance policy (the "base policy"). We also offer other optional benefits as additions to the base policy. For ease of reference, we refer to the base policy and all of the optional benefits that are added to the base policy as the "Policy." The Equity Options allow you to experience the potential growth of the equity markets while maintaining your base policy. There are two different Equity Options, and you may elect to include either or both as optional benefits to your base policy: - - Equity Additions (also known as Variable Additional Insurance) - - Equity Enricher (also known as Variable Additional Benefits). EQUITY OPTIONS PREMIUMS The Equity Options allow some flexibility in making premium payments. 2 8 - - Equity Additions. You can make premium payments by allocating to Equity Additions any dividends or other credits we pay on the base policy or on certain other benefit options (known as credit options) that you may have elected under the base policy. - - Equity Enricher. You can make planned and unplanned premium payments directly to Equity Enricher. EQUITY OPTIONS CASH VALUE Your cash value in an Equity Option reflects your Equity Option's premium payments, the charges we deduct from the cash value, any investment experience you have in our Separate Account, as well as your transfer, loan and withdrawal activity. MetLife doesn't guarantee the investment performance of any investment division and you should consider your risk tolerance before purchasing an Equity Option. TRANSFERS You may transfer cash value from each Equity Option to pay base policy premiums, charges or loan interest. You may also transfer cash value to or from certain other benefit options to an Equity Option, subject to certain limits. Finally, you may make transfers between the two investment options available under the Equity Enricher. EQUITY OPTIONS DEATH BENEFIT Generally, the death benefit is equal to the Equity Option cash value divided by an applicable "net single premium amount" that is specified in your rider and multiplied by $1,000. THE CONDITIONAL GUARANTEED MINIMUM DEATH BENEFIT Generally, you will receive a conditional guaranteed minimum death benefit. In certain situations, however, this guaranteed minimum death benefit can be reduced or eliminated entirely. SURRENDERS, PARTIAL WITHDRAWALS AND LOANS Within certain limits, you may take partial withdrawals from and loans against amounts in the Equity Options. You may also surrender your Equity Option for its cash value, less any applicable charges. TAX TREATMENT In most cases, you will not pay income taxes on withdrawals or surrenders until your cumulative withdrawn amounts exceed the cumulative premiums you have paid under your Policy. If your Policy is a modified endowment contract, you will pay income taxes on loans and withdrawals to the extent of any gains (which is generally the excess of cash value over the premiums paid). In that case, an additional 10% tax may also apply. If the Policy is part of a collateral assignment equity split dollar arrangement with an employer, increases in cash value that are not due to premium payments may be taxed annually. The death benefit may be subject to federal and state estate taxes, but your beneficiary will generally not be subject to income tax on the death benefit. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. 3 9 TABLE OF CHARGES AND EXPENSES This table shows the charges and expenses that you pay under the Equity Options. See "Charges and Deductions," below for more information about the Equity Options charges:
- --------------------------------------------------------------------------------------- TYPE OF CHARGE OR EXPENSE AMOUNT OF CHARGE OR EXPENSE - --------------------------------------------------------------------------------------- MONTHLY DEDUCTION FROM YOUR EQUITY OPTION'S CASH VALUE Cost of insurance charges: Amount varies depending on the specifics of your Policy.(1) Mortality and expense risk and administrative services charge: The charge is equivalent to an effective annual rate of .75% of the cash value in the Separate Account on each monthly anniversary for riders to base policies that have a face amount less than $250,000, or .50% for riders to base policies that have a face amount of $250,000 or greater. - --------------------------------------------------------------------------------------- EQUITY ENRICHER ONLY: Charges we deduct from each premium payment Sales charge: 2% of each premium payment Charge for average expected state taxes attributable to premiums: 2% of each premium payment Charge for expected federal taxes attributable to premiums: 1% of each premium payment - ---------------------------------------------------------------------------------------
- ------------ (1)See "Cost of Insurance" under "Charges and Deductions" for a more detailed discussion of factors affecting this charge. If you would like, we will provide you with an illustration of the impact of these and other charges under the Equity Options based on various assumptions. FUND INVESTMENT MANAGEMENT FEES AND DIRECT EXPENSES Our affiliate, MetLife Advisers, LLC ("MetLife Advisers"), formerly New England Investment Management, LLC, became the investment adviser for the Fund on May 1, 2001. Prior to that time, MetLife was the adviser. The Fund pays investment management fees to MetLife Advisers. The Fund also incurs other direct expenses (see the Fund Prospectus and Statement of Additional Information referred to therein). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of the Fund that correspond to the Separate Account investment division you are using. The following sets forth the available Portfolios' fees and expenses for the year ending December 31, 2000:
- -------------------------------------------------------------------------------------------- TOTAL 2000 MANAGEMENT OTHER ANNUAL PORTFOLIO FEE EXPENSES EXPENSES - -------------------------------------------------------------------------------------------- MetLife Stock Index .25% .03% .28% - -------------------------------------------------------------------------------------------- Janus Mid Cap* .66% .04% .70% - --------------------------------------------------------------------------------------------
- ------------ *This Portfolio is not available for Equity Additions. OTHER Please refer to "Federal Tax Matters--Our Taxation" for a description of certain charges that we currently do not impose but may impose in the future. 4 10 METLIFE MetLife is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife was formed under the laws of New York State in 1868. MetLife Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and group customers. The MetLife companies serve approximately 9 million individual households in the United States and companies and institutions with over 33 million employees and members. It also has international insurance operations in 12 countries. We have listed our directors and certain key officers under "Management," and our financial information under "Financial Statements," below. GIVING US REQUESTS, INSTRUCTIONS OR NOTIFICATIONS YOU CAN CONTACT US AT OUR DESIGNATED OFFICE. Contacting us: You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Designated Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Policy loan; taking a partial withdrawal; surrendering your Policy or an Equity Option; making transfer requests; changing the benefit option to which you want to allocate your policy credits; or changing the allocation between investment divisions for future premium payments that you make to Equity Enricher. Our Designated Office is P.O. Box 300, Warwick, RI 02887. We may name additional or alternate Designated Offices. If we do, we will notify you in writing. When your requests, instructions and notifications become effective: Generally, requests, premium payments and other instructions and notifications are effective on the Date of Receipt. In those cases, the effective time is at the end of a Valuation Period during which we receive them at our Designated Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) - A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. - A Valuation Date is: - Each day on which the New York Stock Exchange is open for trading. - Other days, if we think that there has been a sufficient degree of trading in the Fund's portfolio securities that the current net asset value of its shares might be materially affected. The initial effective time of your Equity Options' investment in the Separate Account is the Investment Start Date. The Investment Start Date is: - For Equity Additions, the credit payment date of the first base policy credit that is allocated to the option or, if sooner, the date of the first 5 11 EACH AVAILABLE INVESTMENT DIVISION INVESTS IN A CORRESPONDING PORTFOLIO OF THE FUND. YOU SHOULD CAREFULLY REVIEW THE INVESTMENT OBJECTIVE, PRACTICES AND RISKS OF EACH AVAILABLE PORTFOLIO, WHICH ARE DESCRIBED IN THE FUND PROSPECTUS THAT YOU HAVE ALSO RECEIVED. transfer of cash value to Equity Additions from the Fixed Additional Insurance Option. - For the Equity Enricher, the end of the first Valuation Date after the latest of: - The date we receive the first premium payment allocated to the Equity Enricher; - The 20th day following the Date of Policy indicated in the base policy; and - The 20th day following the date we receive the first full premium due for the base policy. However, we are considering modifying our procedures in order to provide an earlier Investment Start Date for an application that is submitted without an advance payment of the initial premium or when an advance payment has been refunded by us prior to the issuance of a Policy. You can consult your sales representative as to the status of any such change. Prior to the Investment Start Date, we will place any premium payments you make to the Equity Enricher in our general account, where it will earn a fixed rate of interest, until the Investment Start Date. SEPARATE ACCOUNT UL We established the Separate Account under New York law on December 13, 1988. The Separate Account receives premium payments from the Equity Options described in this Prospectus and other variable life insurance policies that we issue. We have registered the Separate Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"). The assets in the Separate Account legally belong to us; but they are held solely for the benefit of investors in the Separate Account and no one else, including our other creditors. We will keep an amount in the Separate Account that at least equals the value of our commitments to policy owners that are based on their investments in the Separate Account. We can also keep charges that we deduct and other excess amounts in the Separate Account or we can transfer the excess out of the Separate Account. The Separate Account has subdivisions, called "investment divisions." Each investment division invests its assets exclusively in shares of a corresponding Portfolio of the Fund. Currently, only the MetLife Stock Index investment division is available for use with the Equity Additions. Only the MetLife Stock Index and Janus Mid Cap investment divisions are available for use with the Equity Enricher. Amounts you allocate to an investment division receive the investment experience of the investment division, and you bear this investment risk. THE METROPOLITAN SERIES FUND, INC. The Fund is a "series" type of mutual fund, which is registered as an open-end management investment company under the 1940 Act. The Fund is divided into Portfolios, each of which represents a different class of stock in which a corresponding investment division of the Separate Account invests. You should read the Fund prospectus, which you have also received. It contains information about the Fund, the MetLife Stock Index Portfolio and the Janus Mid Cap Portfolio, including the investment objective, strategies, 6 12 risks and investment adviser associated with each Portfolio. It also contains information on the different separate accounts that invest in the Fund (which may or may not be related to MetLife) and certain risks that may arise when diverse separate accounts funding diverse types of insurance products all invest in the same fund. The investment objectives of the available Portfolios are: - - MetLife Stock Index Portfolio: to equal the performance of the Standard & Poor 500 Composite Stock Price Index. - - Janus Mid Cap Portfolio: capital growth. A Portfolio may have a name and/or objective that is very similar to that of a publicly available mutual fund that is managed by the same sub-investment manager. The Portfolios are not publicly available and will not have the same performance as those publicly available mutual funds. Different performance will result from differences in implementation of investment policies, cash flows, fees and size of the Portfolio. As of the end of each Valuation Period, we purchase and redeem Fund shares for the Separate Account at their net asset value without any sales or redemption charges. These purchases and redemptions reflect the amount of any of the following transactions that take effect at the end of the Valuation Period: - - The allocation of Equity Options premiums (less any applicable charges) to the Separate Account. - - Dividends and distributions on Fund shares which are reinvested as of the dates paid (which reduces the value of each share of the Fund and increases the number of Fund shares outstanding, but has no affect on the cash value in the Separate Account). - - Policy loans and loan repayments allocated to the Separate Account. - - Transfers to or from the Separate Account from other Policy parts. - - Withdrawals or surrenders taken from the Separate Account. - - Transfers between the Equity Enricher's available investment options. THE POLICY INCLUDES THE BASE POLICY AND ITS BENEFIT OPTIONS. THE BASE POLICY AND ITS BENEFIT OPTIONS The base policy and all of its benefit options form the entire Policy. In this Prospectus, we refer to each such portion of the Policy as a Policy "part." The base policy provides a fixed amount of life insurance. Benefit options may be added to the base policy. In this Prospectus, we refer to some of the benefit options as "credit options." Credit options are methods under which dividends or other credits that become payable under your Policy, as well as any cash value that you transfer from another credit option that you have in effect, are applied to accumulate additional cash value and purchase additional death benefits. The amount of dividends or other credits on your Policy changes annually, is not guaranteed, and is based on a variety of factors. These factors may include the base policy face amount, the death benefit and credit class of the base policy, as well as the amount of our earnings. Any credits due from any Policy part are paid on the last day of a base policy year, as set forth in the benefit option. Credit options include: - - Equity Additions: a benefit option described in this Prospectus where cash value varies based on the investment experience in one of our separate account investment divisions. 7 13 WE WILL ISSUE AN EQUITY OPTION TO YOU AS OWNER. YOU WILL HAVE ALL THE RIGHTS UNDER THE OPTION. - - Fixed Additional Insurance: a benefit option that is similar to Equity Additions, except that cash value accumulates at fixed interest rates that we declare. - - Dividends with Interest ("DWI"): a benefit option where cash value accumulates with currently taxable interest that we declare periodically. Other benefit options which are not credit options include: - - Equity Enricher: a benefit option described in this Prospectus where cash value varies based on the investment experience in one or both of the available separate account investment divisions. - - Enricher: a paid-up additional insurance benefit option that is similar to Equity Enricher, except that it accumulates a guaranteed cash value that is eligible for a dividend. - - Flexible Additional Insurance Rider ("FLAIR"): a benefit rider that provides additional fixed benefit insurance and has a fixed benefit term insurance element. - - Disability Waiver of Benefits Options: benefit options that waive certain charges or premium requirements for the base policy in the event of disability. (Charges are not waived for the Equity Options). - - Acceleration of Death Benefit Option: a benefit option that can provide a discounted present value of the death benefit, if the insured becomes terminally ill, prior to the insured's death. Subject to certain limits and conditions, we guarantee the cash value in the base policy as well as all of the benefit options, other than the Equity Options. We make this guarantee because these Policy parts provide fixed benefits. Since these fixed benefits are not registered under the federal securities laws, this Prospectus contains only limited information about them. The Policy gives you more information on the operation of these fixed benefits. ISSUING EQUITY OPTIONS If you want an Equity Option, then you must complete an application. We will issue an Equity Option to you only if you are also the owner of the base policy. Your completed application must be received by the Designated Office. The Equity Options are available to base policies meeting the minimum face amount and eligibility requirements that we establish. You may not add the Equity Additions while any term insurance is in effect under FLAIR. Once FLAIR becomes fully funded, or you discontinue the term insurance provided by FLAIR, you may add the Equity Additions. We reserve the right to reject an application for any reason permitted by law, and our acceptance of an application is subject to our underwriting rules. The Date of Policy is usually the date the base policy application is approved. We use the Date of Policy to calculate base policy years and months. We are considering changing the way we define Date of Policy in order to delay the date as of which charges and deductions commence if the application for the base policy was submitted without an advance payment of the initial premium or if we have refunded an advance payment prior to the issuance of the base policy. You can consult your sales representative as to the status of any such change. The insured will be the same individual as the insured in the base policy. An "insured" is the person upon whose life we issue the Policy. You do not have to 8 14 be the insured. For the purpose of computing the insured's age under the Policy, we start with the insured's age on the Date of Policy, which is set forth in the base policy. Age under the Policy at any other time is then computed using that issue age and adding the number of full base policy years completed. To elect the Equity Enricher you must complete the Equity Enricher application. We will not require evidence of insurability other than that required in connection with the issuance of the base policy, unless: - - The amount of premiums you actually pay for the Equity Enricher during the first year is greater than the cumulative voluntary planned periodic premium payments indicated in the application, or you exceed certain other premium limitations described below after the first year; or - - you add the Equity Enricher after we issue the base policy. To elect the Equity Additions, you may complete the Equity Additions application either at the same time as the application for the base policy or after the base policy has been issued. If you decide to add Equity Additions after you own the base policy, it may reduce the amount of premiums that you could pay to your Policy before it would become a modified endowment contract. If you contact us, we will tell you what these premium limits are. We will not require additional evidence of insurability for the Equity Additions, unless you desire to make a payment that is derived from another credit option that does not itself have a death benefit. Insurance coverage under Equity Additions commences on its Investment Start Date, assuming coverage under the base policy is then in effect. Insurance coverage under Equity Enricher commences at the later of delivery of the option to you and our Date of Receipt of your first premium payment for that option. For coverage under Equity Enricher to be effective, the insured's health must be the same as stated in your application and, in most states, the insured must not have sought medical advice or treatment after the date of the application. As to when charges under an Equity Option begin, see "Charges Included in the Monthly Deduction." EQUITY OPTIONS BENEFITS THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE EQUITY OPTIONS. EQUITY OPTIONS ISSUED IN YOUR STATE MAY PROVIDE DIFFERENT FEATURES AND BENEFITS FROM, AND IMPOSE DIFFERENT COSTS THAN, THOSE DESCRIBED IN THIS PROSPECTUS. YOUR EQUITY OPTIONS RIDER AND ANY ENDORSEMENTS ARE THE CONTROLLING DOCUMENTS. YOU SHOULD READ THOSE DOCUMENTS CAREFULLY FOR ANY VARIATIONS IN YOUR STATE. INSURANCE PROCEEDS We will pay your beneficiary any insurance proceeds as of the end of the Valuation Period that includes the insured's date of death. We will pay this amount after we receive documents that we request as due proof of the insured's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the insured's lifetime. If you make no selection, we will place the amount in an account to which we will credit interest, and the beneficiary will have immediate access to all or part of that amount. The beneficiary has one year from the date the insurance proceeds are paid to change the selection from a single sum payment to an income plan, as long as we have made no payments from the interest-bearing account. If the terms of the income plan permit the beneficiary to withdraw the entire amount from the plan, the beneficiary can also name contingent beneficiaries. 9 15 EQUITY OPTIONS OFFERS A CONDITIONAL GUARANTEED MINIMUM DEATH BENEFIT. The insurance proceeds equal the Equity Option's death benefit. EQUITY OPTIONS DEATH BENEFITS The Equity Option's death benefit is: - - the cash value (after we deduct the Mortality and Expense Risk and Administrative Services Charge and the Cost of Insurance Charge, pro rated for the appropriate period) at the end of the Valuation Period in which the insured dies; divided by - - the net single premium for that day (see "Net Single Premium" below); multiplied by - - $1,000. Any increase or decrease in the cash value of an Equity Option also will increase or decrease the death benefit that otherwise would apply. In such cases, the death benefit will change by a larger amount than does the cash value. Any such increases in death benefit, however, will be partially or wholly offset (and any decreases will be accentuated) by the fact that the net single premium increases the longer your Policy is outstanding. Therefore, in order for your Equity Option death benefit to increase or remain constant, your Equity Option cash value must increase enough to compensate for the effect of the increases in net single premium. If your Equity Option cash value declines to zero (due to adverse investment results, transfers out of the Equity Option, the charges we deduct, and/or insufficient premium payments), your Equity Option death benefit also will be zero. ALTERNATE DEATH BENEFIT In no event will the Policy death benefit be lower than the minimum amount required to maintain the Policy as life insurance under the federal income tax laws (which calculation shall exclude coverage provided under the DWI benefit option). CONDITIONAL GUARANTEED MINIMUM DEATH BENEFIT We provide a conditional guaranteed minimum death benefit that will be in effect during the first 7 years of your base policy or another 7 year period beginning from any date your policy is "materially modified" (within the meaning of the tax law test discussed under "Federal Tax Matters-modified endowment contract status," below). During any such 7 year period, the conditional guaranteed minimum death benefit generally will equal the Equity Option's death benefit at the beginning of each such 7 year period. The guaranteed minimum death benefit ends: - - if the Policy becomes a Modified Endowment Contract; or - - for the Equity Additions, if you change your credit option to a different credit option for the next credit payment date. The conditional guaranteed minimum death benefit is reduced for any: - - loan; - - withdrawal; or - - cash value transfer from the Equity Option. You should consult with your MetLife account representative before taking any action listed above to find out whether the action will affect the conditional guaranteed minimum death benefit. 10 16 EQUITY OPTIONS ARE DESIGNED TO ACCUMULATE CASH VALUE. If your conditional guaranteed minimum death benefit is reduced or ends, your Policy may become a modified endowment contract. EQUITY OPTIONS CASH VALUES Your Equity Option's cash value equals the Separate Account cash value. The Separate Account cash value is allocated to each applicable investment division. An Equity Option's cash value is calculated as follows: - - On the Investment Start Date, we will allocate your cash value to each applicable investment division. - - Thereafter, at the end of each Valuation Period the cash value in the investment division will equal: - The cash value in the investment division at the beginning of the Valuation Period; plus - All Equity Option premiums (less any applicable charges) and cash value transfers that are directed into the investment division during the Valuation Period; minus - All partial cash withdrawals, loan amounts and cash value transfers out of the investment division during the Valuation Period; minus - The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus - The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the portfolio during the period. The net investment return could in the future be reduced by a charge for taxes that we have the right to impose. If your Equity Option has no cash value, we will not provide any insurance coverage under it, nor will we take a monthly deduction, until the Equity Option does have cash value. INCOME PLANS GENERALLY, THE POLICY'S INSURANCE PROCEEDS OR AMOUNTS PAID UPON SURRENDER OF YOUR POLICY CAN BE PAID UNDER AN INCOME PLAN INSTEAD OF IN A LUMP SUM. Before you purchase an income plan you should consider: - - The tax consequences associated with the Policy proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax adviser about tax consequences. - - That your Policy will terminate at the time you purchase an income plan and you will receive a new contract, which describes the terms of the income plan. You should carefully review the terms of the new contract, because it contains important information about the terms and conditions of the income plan. - - That these plans do not have a variable investment return. 11 17 YOU MAY TRANSFER CASH VALUE AMONG THE ELIGIBLE PORTIONS OF YOUR POLICY AT ANY TIME. Generally, we currently make the following income plans available: - ---------------------------------------------------------------------------------------- - Interest Income - Installment Income for a Stated Period - ---------------------------------------------------------------------------------------- - Installment Income for a Stated - Single Life Income--Guaranteed Payment Amount Period - ---------------------------------------------------------------------------------------- - Joint and Survivor Life Income - Single Life Income--Guaranteed Return - ----------------------------------------------------------------------------------------
EQUITY OPTIONS RIGHTS CASH VALUE TRANSFERS You may transfer cash value from an Equity Option to pay premiums, loan interest, or charges under the base policy. You can also make the following transfers: - - For the Equity Additions, transfers can be made to or from the Fixed Additional Insurance credit option. - - For the Equity Enricher, transfers can be made between the available investment divisions and/or between the Equity Enricher and the Enricher. We will adjust any credit that would be due under a Policy part to reflect the timing and effect of any transfer. Any transfer will reduce the conditional guaranteed minimum death benefit if, and in the same proportion as, it reduces the Equity Options' cash value. There is no charge for cash value transfers. If you would like to make a transfer, you must indicate which investment division, where relevant, and which Policy parts are involved in the transfer. Transfers among the investment divisions and transfers between an Equity Option and any other Policy part are not currently taxable transactions. The Fund may restrict or refuse certain transfers between or purchases of shares in its Portfolios as a result of certain market timing activities. You should read the Fund's prospectus for more details. We reserve the right to refuse to accept any transaction request where the request would tend to disrupt administration of the Equity Options or is not in the best interests of Equity Option owners, or the Separate Account. - - AUTOMATED TRANSFER: We may in the future allow you to make automatic transfers of Equity Option cash values to pay the base policy premiums. If we do, we will set forth the terms and conditions in the forms we provide to you to establish the automatic transfers. - - TRANSFERS BY TELEPHONE: We may, if permitted by state law, allow you to make transfer requests and changes to allocations of Equity Enricher premiums by phone. We may also allow you to authorize your sales representative to make such requests. The following procedures apply: - We must have received your authorization in writing satisfactory to us, to act on instructions from any person that claims to be you or your sales representative, as applicable, as long as that person follows our procedures. - We will institute reasonable procedures to confirm that instructions we receive are genuine. Our procedures will include receiving from the caller your personalized data. 12 18 - All telephone calls will be recorded. - You will receive a written confirmation of any transaction. - Neither the Separate Account nor we will be liable for any loss, expense or cost arising out of a telephone request if we reasonably believed the request to be genuine. - You should contact our Designated Office with any questions regarding the procedures. LOAN PRIVILEGES YOU CAN BORROW FROM US AND USE YOUR POLICY AS SECURITY FOR THE LOAN. You may obtain a loan from us whenever your Policy has a loan value. The loan value equals the Policy cash value less the anticipated loan interest for the remainder of that base policy year. We will take the loan from available cash value in accordance with our administrative procedures that are in effect at the time you take the loan. As of the Date of Receipt, for any loan request that affects an Equity Option, we will: - - Remove an amount equal to the loan from your Equity Option . We will place an equal amount in the Fixed Additional Insurance option (if the loan is from Equity Additions) or in the Enricher (if the loan is from the Equity Enricher), where it will receive interest in accordance with the option's terms. - - Charge you interest, which will accrue daily. We will tell you the initial interest rate that applies to your loan and mail you advance notices of any increases applicable to existing loans. Your interest payments are due at the end of each Policy year. If you don't pay the interest, we will treat it as a new Policy loan, which will be taken from available cash value in accordance with our administrative procedures that are in effect at the time. The interest rate charged for a base policy year will never be more than the maximum allowed by law and will generally be the greater of: - the published monthly average for the calendar month ending two months before the start of such year; or - the rate used to calculate the guaranteed cash value of the base policy and its riders for the base policy year plus 1%. The published monthly average means (a) Moody's Corporate Bond Yield Average Monthly Average Corporates, as published by Moody's Investors Service, Inc., or any successor service; or (b) If the Moody's average is not published, a substantially similar average established by regulation issued by the insurance supervisory official of the state in which the base policy is delivered. Repaying your loans (plus accrued interest) is done by sending in payments of at least $50. We will allocate your repayment to the fixed additional insurance benefit rider to which we had transferred the Equity Options cash value that you used as security for your loan. You may then transfer such repaid amount to your Equity Option at any time. Before taking a Policy loan, you should consider the following: - - Interest payments on loans are generally not deductible for tax purposes. - - Under certain situations, Policy loans could be considered taxable distributions. 13 19 YOU CAN SURRENDER YOUR EQUITY OPTION FOR ITS CASH VALUE. - - If you surrender your Policy or if we terminate your Policy, any outstanding loan amounts (plus accrued interest) will be taxed as a distribution. Generally, there will be federal income tax payable on the amount by which withdrawals and loans exceed the premiums paid to date. (See "Federal Tax Matters--The Policy--Loans" below.) In addition, the amounts borrowed and withdrawn reduce the Policy's cash value and any remaining cash value of the Policy may be insufficient to pay the income tax on your gains. - - A Policy loan increases the chances of our terminating your Policy due to insufficient cash value. - - An Equity Option's conditional guaranteed minimum death benefit will be reduced by the same proportion as the loan reduces the Equity Option's cash value. - - Your Policy's death benefit will be reduced by any unpaid loan (plus accrued interest). SURRENDER AND WITHDRAWAL PRIVILEGES If you surrender an Equity Option, you can choose to receive the option's cash value or have the proceeds transferred to any benefit option that is permitted to receive premiums at that time. In the event of such a transfer, any credit that might be payable on amounts in such option will be adjusted to reflect the timing of receipt of such transfer. We will deem your request for surrender of the base policy also to be a request for surrender of the Equity Option. You may receive the surrender proceeds in a single sum or under an income plan. If you would like to make a partial withdrawal, you may direct from which Equity Option and/or investment division, where relevant, the amount will be taken. If you do not so direct, we will withdraw cash value in accordance with our administrative procedures that are in effect at the time of the withdrawal. If you request a partial withdrawal of an amount that exceeds the cash value in the chosen Equity Option, or investment division, we will tell you and you may then ask for a smaller withdrawal, or a different allocation, or you must surrender the Equity Option. Before surrendering your Equity Option or requesting a partial withdrawal you should consider the following: - - Amounts received may be taxable as income and, if your Policy is a modified endowment contract, subject to certain tax penalties. - - Your Policy could become a modified endowment contract. - - For partial withdrawals, your death benefit will decrease. - - In some cases you may be better off taking a Policy loan, rather than a withdrawal. - - The conditional guaranteed minimum death benefit will be reduced by the same proportion as the withdrawal reduces the Equity Option's cash value. THIRD PARTY REQUEST Generally, we accept requests for transactions or information only from you. Therefore, we reserve the right to not process transactions requested on your behalf by your agent with a power of attorney or any other 14 20 authorization. This includes processing transactions by an agent you designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers for a number of other Policy owners, and who simultaneously makes the same request or series of requests on behalf of other Policy owners. EQUITY OPTIONS PREMIUMS The payments into the Equity Options won't guarantee that your Equity Option will have a death benefit. Rather, this depends on the Equity Option's cash value and the conditional guaranteed minimum death benefit. PAYING PREMIUMS To the extent discussed above, you can move cash value into an Equity Option from a fixed option that corresponds to that Equity Option. Also, you can make premium payments: - - For the Equity Additions: through dividends or other credits on the Policy. Any request to designate the Equity Additions (or any other credit options) as the option for receiving credits under your Policy will take effect 60 days after our Date of Receipt of your written request. Only one election may be made for any credit payment date and that election will apply to all credits payable under the Policy. - - For the Equity Enricher: - through a voluntary planned periodic premium schedule. You choose the schedule on your Equity Enricher application. The schedule sets forth the amount of premiums, fixed payment intervals, and the period of time that you intend to pay premiums. The schedule can be: (a) annual; (b) semi-annual; (c) periodic automatic pre-authorized transfers from your checking account ("check-o-matic"); (d) systematic through payment plans that your employer makes available; or (e) through another method to which we agree. You do not have to pay premiums in accordance with your voluntary planned periodic premium schedule. - through unscheduled premium payments that you can make at any time. We may adopt a practice of holding a premium payment received before its due date in a non-interest bearing holding account until the due date, if necessary to prevent a Policy becoming a modified endowment contract. (See "Modified Endowment Contracts" under "Tax Matters" below.) Under any such procedures, we would send you an additional notice of this arrangement by letter immediately after receiving your payment. We would also give you the option to either have the money held until the due date or applied on our Date of Receipt of your instructions to apply the money (unless the due date has already passed). MAXIMUM AND MINIMUM PREMIUM PAYMENTS - - Total premium payments under all benefit options (excluding the Equity Additions, DWI and disability waiver of benefits options) may not exceed $2.5 million in the first base policy year and $500,000 in each year thereafter. - - You may not pay premiums that exceed tax law premium limitations for your Policy to qualify as life insurance. We will return any amounts that 15 21 exceed these limits, except that we will keep any amounts that are required to keep the Policy from terminating. We will let you make premium payments that would turn your Policy into a modified endowment contract, but we will tell you of this status in your annual statement, and if possible we will tell you how to reverse the status. - - The following additional limitations apply to your premiums under the Equity Enricher. When applying the limits, we aggregate payments to the Equity Enricher with payments to the Enricher: I. You may not make any premium payments: A. While we are considering your application for benefits on the base policy under a disability waiver of benefits option or an acceleration of death benefit option. B. If we are paying or have finished paying benefits under one of the above options. C. If you have made no payments to the Equity Enricher during the first year after its issuance or for any two consecutive base policy years (unless, during any part of such period, your right to make payments was terminated for reasons described in A, or, unless you were taking withdrawals from the Equity Enricher to pay for a child's education and you provide us with proof of such payment that we find satisfactory). D. After the later of the base policy anniversary on which the insured is 65, or the tenth base policy anniversary. In no event will payments be accepted after the base policy anniversary on which the insured is age 86. In any of these cases, you may elect to receive the cash value, transfer the cash value to the Enricher, or leave the cash value in the Equity Enricher. If you leave the cash value in the Equity Enricher, it will remain subject to applicable fees and charges. If investment performance is not sufficient to offset the amount of these expenses, the death benefit may decline or terminate. II. Your voluntary planned periodic payments must be at least: A. $250 annually ($100 for policies that are part of our Tower or Executive Series or where the insured was under 18 when the base policy was issued). B. $125 semi-annually ($50 for policies that are part of our Tower or Executive Series or where the insured was under 18 when the base policy was issued). C. $25 for all monthly methods of payment ($10 for policies that are part of our Tower or Executive Series or where the insured was under 18 when the base policy was issued). III. Each unscheduled premium payment should be at least $250 ($100 for the Tower or Executive Series or where the insured was under age 18 when the base policy was issued). IV. During the first base policy year, we reserve the right to reject any amount that exceeds the cumulative amount of your first base policy year's voluntary planned periodic premiums. 16 22 NET PREMIUMS UNDER EQUITY ENRICHER ARE YOUR PREMIUM PAYMENTS MINUS THE CHARGES WE DEDUCT FROM THOSE PREMIUMS. V. During the first base policy year, the maximum annual payment we permit is 15 times the nonsmoker standard annual premium (minus the base policy fee) set forth in your base policy. VI. After the first base policy year, the maximum payment we permit is the greater of A. 3 times the base policy's nonsmoker standard annual premium (minus the base policy fee) set forth in your base policy; or B. $5,000 VII. We reserve the right to require evidence of insurability of premium payments that exceed both $25,000 and 2 times the greater of the total payments made in either of the prior two Policy years. ALLOCATING EQUITY ENRICHER PREMIUM You can instruct us to allocate your Equity Enricher premiums (after deduction of any charges) to either or both of the available separate account investment divisions on the Investment Start Date. The percentage of your allocation into each division must be at least 1% and must be a whole number. You can change this allocation (effective after the Investment Start Date) by giving us written notice at our Designated Office or in any other manner that we may permit. EQUITY OPTIONS TERMINATION AND REINSTATEMENT Termination We will terminate Equity Options if we terminate the base policy or if you reduce your base policy face amount of insurance below $50,000. We will terminate your base policy if we do not receive sufficient premium payments (or sufficient loan repayments so that the loan portion does not exceed the cash value of the Policy) by the end of a 31 day grace period. If the insured dies during the grace period, the insurance proceeds will still be payable, but we will deduct any due and unpaid base policy premiums and any Policy loan and loan interest from the proceeds. At the end of the grace period, if you have elected to do so, and if there is sufficient cash value in your Equity Option to do so, we will pay your premium from the Equity Option cash value through an automatic loan feature. If the automatic loan feature is not used to pay the base policy premium and the Policy is terminated, we will transfer your Equity Additions cash value into the Fixed Additional Insurance option and your Equity Enricher cash value into the Enricher in accordance with your Policy's provisions and our administrative practices. Reinstatement We will reinstate the Equity Option if we reinstate your base policy. The reinstated Equity Option will have no cash value until an Equity Option premium payment or a permitted transfer into an Equity Option is made. We will reinstate your base policy subject to certain terms and conditions that the base policy provides. We must receive your reinstatement request within 3 years (or within any longer period provided by state law) after the end of the base policy's grace period and before its Final Date. 17 23 CAREFULLY REVIEW THE "TABLE OF CHARGES AND EXPENSES" IN THE "SUMMARY" WHICH SETS FORTH THE CHARGES THAT YOU PAY UNDER THE EQUITY OPTIONS. EQUITY OPTIONS CHARGES AND DEDUCTIONS The Equity Options charges compensate us for our expenses and risks. The name of a charge can suggest the purposes for which the charge is imposed. For example, the "sales charge" for the Equity Enricher is designed primarily to defray commissions and other costs of marketing that Option. However, our revenues from any particular Equity Option charge may be more or less than any costs or expenses that charge may be intended primarily to cover. We may use our revenues from one Equity Options charge to pay other costs and expenses in connection with the Equity Options. We may also profit from our revenues from all the Equity Options charges combined. The following sets forth additional information about some (but not all) of the Equity Options charges. CHARGE FOR AVERAGE EXPECTED STATE TAXES ATTRIBUTABLE TO PREMIUMS: We make this charge, with respect to the Equity Enricher, to reimburse us for the state premium taxes that we must pay on premiums we receive. Premium taxes vary from state to state and currently range from 0 to 3.5%. Our charge approximates the average tax rate we expect to pay on premiums we receive from all states. CHARGES INCLUDED IN THE MONTHLY DEDUCTION: We take the monthly deduction from each investment division you are using, in proportion to the Equity Option's Cash Value in that investment division at the beginning of the base policy month, beginning with the first base policy month during which an Equity Option is in effect. We deduct the monthly deduction as of each base policy monthly anniversary. If there is no cash value in the Equity Option, there is no insurance coverage provided under the Option and therefore no monthly deduction is due. - - Cost of insurance: This charge varies monthly based on many factors. Each month, we determine the charge by multiplying the applicable cost of insurance percent by the cash value at the end of the prior Policy month. - - The cost of insurance percent is based on our expectations as to future experience, taking into account the insured's sex (if permitted by law), age, smoking status and rate class. The percentages will never exceed the guaranteed cost of insurance percentages set forth in your Equity Option rider. These guaranteed percentages are based on certain 1980 Commissioners Standard Ordinary Mortality Tables and the insured's sex (if permitted by law), age and rate class. Our current percentages are lower than the maximums in most cases. We review our percentages periodically and may adjust them, but we will apply the same percentages to everyone who has had their Equity Option for the same amount of time and who is the same age, sex and rate class. As a general rule, the cost of insurance percentage increases each year you own your Equity Option, as the insured's age increases. - Rate class relates to the level of mortality risk we assume with respect to an insured. It can be the standard rate class, or one that is higher or lower (and, if the insured is 18 or older, we divide rate class by smoking status). The insured's rate class will affect your charge for insurance coverage. 18 24 - - Mortality and expense risk and administrative services charge: We make this monthly charge primarily to compensate us for: - expenses we incur in the administration of the Equity Option - mortality risks that insureds may live for a shorter period than we expect; and - expense risks that our issuing and administrative expenses may be higher than we expect. The amount of the charge is lower if the base policy's face amount is at least $250,000 at the date we calculate the charge. Therefore, changes you make in your base policy's face amount could affect the rate at which this charge applies to you. NET SINGLE PREMIUM The net single premium varies from day to day and is based on the 1980 Commissioners Standard Ordinary Mortality Tables and the insured's sex (where permitted by state law or unless the Policy is issued in connection with certain types of employee benefit plans), age and, in the case of Equity Additions, whether the cash value originally came from the base policy or from Enricher. To determine a death benefit, we divide an Equity Option's cash value by the net single premium. While it is not a charge or expense, the lower the net single premium, the higher the death benefit, and vice versa. The net single premium under your Equity Option will increase each month, as the insured grows older. The amount of your net single premium for each month is prescribed in the Equity Option itself and we will not alter such amounts. FEDERAL TAX MATTERS The following is a brief summary of some tax rules that may apply to your Policy. You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy, especially before you make unscheduled premium payments, change the coverage provided by the base policy or the benefit options, take a loan or withdrawal, or assign or surrender the Policy. THE POLICY Insurance proceeds - - Generally excludable from your beneficiary's gross income. - - The proceeds may be subject to federal estate tax: (i) if paid to the insured's estate; or (ii) if paid to a different beneficiary if the insured possessed incidents of ownership at or within three years before death. - - If you die before the insured, the value of your Policy (determined under IRS rules) is included in your estate and may be subject to federal estate tax. - - Whether or not any federal estate tax is due is based on a number of factors including the estate size. Cash value (if your Policy is not a modified endowment contract) - - You are generally not taxed on your cash value (except with respect to the DWI option) until you withdraw it or surrender your Policy. In these 19 25 cases, you are generally permitted to take withdrawals up to the amount of premiums paid without any tax consequences. However, withdrawals will be subject to income tax after you have received amounts equal to the total premiums you paid. Somewhat different rules apply in the first 15 Policy years, when a distribution may be subject to tax if there is a gain in your Policy (which is generally when your cash value exceeds the cumulative premiums you paid). If your Policy is part of a collateral assignment equity split dollar arrangement, there is a risk that increases in cash value may be taxed annually. The IRS has recently issued guidance on split dollar insurance plans. A tax advisor should be consulted with respect to this new guidance if you have purchased or are considering the purchase of a Policy for a split dollar insurance plan. There may be an indirect tax upon the income in the Policy or the proceeds of a Policy under the Federal corporate alternative minimum tax, if you are subject to that tax. For income tax purposes, if you surrender an Equity Option for its cash value but the base policy remains in force, you will be considered to have made a partial withdrawal. Loans - - Loan amounts received will generally not be subject to income tax, unless your Policy is or becomes a modified endowment contract, is exchanged or terminates. - - Interest on loans is generally not deductible. For businesses that own a Policy, at least part of the interest deduction unrelated to the Policy may be disallowed unless the insured is a 20% owner, officer, director or employee of the business. - - If your Policy terminates (upon surrender, cancellation, lapse or, in most cases, exchange) while any Policy loan is outstanding, the amount of the loan plus accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Policy distribution. Modified Endowment Contracts These contracts are life insurance contracts where the premiums paid during the first 7 years after the Policy is issued, or after a material change in the Policy, exceed tax law limits referred to as the "7-pay test." Material changes in the Policy include changes in the level of benefits and certain other changes to your Policy after the issue date. Reductions in benefits during a 7-pay period may cause your Policy to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. If your Policy is considered a modified endowment contract the following applies: - - The death benefit will generally be income tax free to your beneficiary, as discussed above. - - Amounts withdrawn or distributed before the insured's death, including loans, assignments and pledges, are treated as income first and subject to income tax (to the extent of any gain in your Policy). All modified endowment contracts you purchase from us and our affiliates during the 20 26 same calendar year are treated as a single contract for purposes of determining the amount of any such income. - - An additional 10% income tax generally applies to the taxable portion of the amounts received before age 59 1/2, except generally if you are disabled or if the distribution is part of a series of substantially equal periodic payments. Diversification In order for your Policy to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Equity Options. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in immediate taxation to Policy owners of gains under their Policies. Changes to tax rules and interpretations Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Policy. These changes may take effect retroactively. We reserve the right to amend the Policy in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: - - Possible taxation of cash value transfers among the options within the Policy. - - Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. - - Possible changes in the tax treatment of Policy benefits and rights. OUR TAXATION In general, we don't expect to incur federal, state or local taxes upon the earnings or realized capital gains attributable to the assets in the Separate Account relating to the cash value of the Equity Options. If we do incur such taxes, we reserve the right to charge cash value allocated to the Separate Account for these taxes. SHOWING PERFORMANCE We may advertise or otherwise show: - - Investment division performance ranking and rating information as it compares among similar investments as compiled by independent organizations. - - Comparisons of the investment division with performance of similar investments and appropriate indices. - - Our insurance company ratings that are assigned by independent rating agencies and that are relevant when considering our ability to honor our guarantees. - - Personalized illustrations based on historical Separate Account performance. 21 27 CAREFULLY REVIEW YOUR POLICY WHICH CONTAINS A FULL DISCUSSION OF ALL ITS PROVISIONS. RIGHTS WE RESERVE We reserve the right to make certain changes if we believe the changes are in the best interest of our Policy owners or would help carry out the purposes of the Policy. We will make these changes in the manner permitted by applicable law and only after getting any necessary owner and regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: - - Operating the Separate Account in any other form that is permitted by applicable law. - - Changes to obtain or continue exemptions from the 1940 Act. - - Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. - - Substituting Fund shares in an investment division for shares of another portfolio of the Fund or another fund or investment permitted by law. - - Changing the way we assess charges without exceeding the aggregate amount of the Equity Option's guaranteed maximum charges. - - Making any necessary technical changes to the Policy to conform it to the changes we have made. OTHER POLICY PROVISIONS You should read your Policy, including the Equity Options riders, for a full discussion of their provisions. The following is a brief discussion of some of the provisions that you should consider: FREE LOOK PERIOD You can return the Policy during this period. The period is the later of: - - 10 days after you receive the Policy (unless state law requires your Policy to specify a longer period); and - - 45 days after we receive Part A of the completed application. If you return your Policy, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. INCONTESTABILITY We will not contest your Policy after 2 years from the base policy's issue or reinstatement. SUICIDE If the insured commits suicide within the first two base policy years (or any different period specified in your base policy, if required by state law), your beneficiary will receive all premiums paid to the Policy (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. 22 28 AGE AND SEX We will adjust benefits to reflect the correct age and sex of the insured if this information isn't correct in any Policy application. ASSIGNMENT AND CHANGE OF OWNERSHIP You can designate a new owner or otherwise assign an Equity Option only as part of an assignment of your Policy. You can assign your Policy as collateral if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Designated Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax adviser before making any change of ownership or other assignment. PAYMENT AND DEFERMENT Generally, we will pay or transfer amounts from the Separate Account within seven days after the Date of Receipt of all necessary documentation required for such payment or transfer. We can defer this if: - - The New York Stock Exchange has an unscheduled closing. - - There is an emergency so that we could not reasonably determine the investment experience of an Equity Option. - - The Securities and Exchange Commission by order permits us to do so for the protection of Equity Option owners (provided that the delay is permitted under New York State insurance law and regulations). - - With respect to the insurance proceeds, entitlement to a payment is being questioned or is uncertain. - - We are paying amounts attributable to a check. In that case we can wait for a reasonable time (15 days or less) to let the check clear. We currently pay interest on the amount of insurance proceeds at 3% per year (or higher if state law requires) from the date of death until the date we pay the benefit. DIVIDENDS The Equity Options are "nonparticipating," which means they are not eligible for dividends from us and do not share in any distributions of our surplus. SALES AND ADMINISTRATION OF THE POLICIES WE PERFORM THE SALES AND ADMINISTRATIVE SERVICES FOR THE POLICIES. We serve as the "principal underwriter," as defined in the 1940 Act, for the Policy and other variable life insurance and variable annuity contracts issued by a subsidiary and us. We are registered under the Securities Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers, Inc. We are sub-investment manager to certain Portfolios of the Metropolitan Series Fund, Inc. and may also provide advisory services to other clients. BONDING Our directors, officers and employees are bonded in the amount of $50,000,000, subject to a $5,000,000 deductible. 23 29 YOU CAN GIVE US VOTING INSTRUCTIONS ON SHARES OF THE FUND PORTFOLIO THAT ARE ATTRIBUTABLE TO YOUR EQUITY OPTION. DISTRIBUTING THE POLICIES We sell the Policies that include an Equity Option through licensed life insurance sales representatives: - - Registered through us. - - Registered through other broker-dealers, including a wholly owned subsidiary. COMMISSIONS We do not pay commissions for the sale of the Equity Additions. However, representatives who write the Policy receive compensation calculated by adding the cash value in the Policy and in certain other products offered by MetLife and our affiliates. This compensation will not exceed .12% per year of the total aggregate cash value. We pay commissions on the sale of the base policy and certain riders. We pay maximum commissions on the Equity Enricher of 2% of the gross amount paid for each premium payment. The commissions do not increase the charges deducted from the Policy. Commissions paid on this product in 1999 and 2000 were 0 and $50,000 respectively. We also pay the sales manager of a sales representative employed by us an override commission based on many factors including the commissions paid to the representative who sold the Equity Option and to other representatives the sales manager supervises. VOTING RIGHTS The Fund has shareholder meetings from time to time to, for example, elect directors and approve some changes in investment management arrangements. We will vote the shares of each Portfolio that are attributed to your Policy based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in the Fund. If you are eligible to give us voting instructions, we will send you informational material and a form to send back to us. We are entitled to disregard voting instructions in certain limited circumstances prescribed by the SEC. If we do so, we will give you our reasons in the next semi-annual report to Equity Option owners. The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: - - Your cash value in the corresponding investment division; by - - The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Policy owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. Also, we will vote Fund shares that are not attributable to insurance or annuity owners (including shares that we hold in our general account) or that are held in separate accounts that are not registered under the 1940 Act in the 24 30 same proportion as the aggregate of the shares for which we received voting instructions from all insurance and annuity owners. REPORTS Generally, you will promptly receive statements confirming your significant transactions involving Equity Options such as: - - Transfers between Equity Options and other Policy parts. - - Transfers between investment divisions under Equity Enricher. - - Partial withdrawals. - - Loan amounts you request. - - Premium payments. If your premium payments are made through check-o-matic or another systematic payment method, we will not send you any confirmation in addition to the one you receive from your bank or employer. We will also send you an annual statement within 30 days after a Policy year that will summarize the year's transactions and include information on: - - Deductions and charges. - - Status of the death benefit. - - Cash values. - - Amounts in each investment division you are using. - - Status of Policy loans. - - Automatic loans to pay interest. - - Information on your modified endowment contract status (if applicable). We will also send you the Fund's annual and semi-annual reports to shareholders. PERSONALIZED ILLUSTRATIONS CAN HELP YOU UNDERSTAND HOW YOUR EQUITY OPTIONS VALUES CAN VARY. ILLUSTRATION OF EQUITY OPTIONS BENEFITS In order to help you understand how your Equity Option values would vary over time under different sets of assumptions, we will provide you with certain illustrations upon request. These will be based on the age and insurance risk characteristics of the insured under your Policy and such factors as the premium payment amounts and rates of return (within limits) that you request. You can request such illustrations at any time. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. GETTING MORE INFORMATION We are regulated by the New York Insurance Department and periodically are examined by them. We are also subject to the laws and regulations of all the jurisdictions in which we do business and, if required, we have filed the Equity Options for approval in every jurisdiction in which the Equity Options are sold. The Equity Options may not be available in every jurisdiction. You should ask your sales representative whether the Equity Options are available in your jurisdiction. We file annual statements on our operations, including financial statements, with insurance departments of various jurisdictions so that they can review 25 31 our solvency and compliance with applicable laws and regulations. You can review these statements which are available at the offices of the various insurance departments. This Prospectus is part of a registration statement that we filed with the Securities and Exchange Commission under the Securities Act of 1933. The registration statement includes additional information, amendments and exhibits. You can get this information from the Securities and Exchange Commission (a copying fee may apply) by visiting or writing to its Public Reference Room or using its Internet site at: - - Securities and Exchange Commission Public Reference Room Washington, D.C. 20549 Call 1-800-SEC-0330 (for information about using the Public Reference Room) Internet site: http://www.sec.gov LEGAL, ACCOUNTING AND ACTUARIAL MATTERS Anne M. Goggin, Chief Counsel-Individual Business at MetLife, has passed upon the legality of the Policies. The law firm of Foley & Lardner, Washington, D.C., has advised us on certain matters relating to the federal securities laws. Deloitte & Touche LLP, independent auditors, audited the financial statements included in this Prospectus, as stated in their reports appearing herein. The financial statements are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Policy. Marian Zeldin, FSA, MAAA, Vice-President and Actuary of MetLife, has examined actuarial matters included in the registration statement, as stated in her opinion filed as an exhibit to the registration statement. 26 32 MANAGEMENT The present directors and the senior officers and secretary of MetLife are listed below, together with certain information concerning them: DIRECTORS, OFFICERS-DIRECTORS
- --------------------------------------------------------------------------------------------------------- PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH METLIFE - --------------------------------------------------------------------------------------------------------- Curtis H. Barnette Chairman Emeritus Director Bethlehem Steel Corp. 1170 Eight Ave.--Martin Tower 101 Bethlehem, PA 18016 - --------------------------------------------------------------------------------------------------------- Robert H. Benmosche Chairman of the Board, President and Chairman of the Board, Chief Executive Officer President, MetLife, Inc. and Chief Executive Officer and Metropolitan Life Insurance Company Director One Madison Ave. New York, NY 10010 - --------------------------------------------------------------------------------------------------------- Gerald Clark Vice Chairman of the Board and Vice Chairman of the Board, Chief Investment Officer Chief Investment Officer and MetLife, Inc. and Director Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - --------------------------------------------------------------------------------------------------------- Joan Ganz Cooney Chairman, Executive Committee Director Sesame Street Workshop One Lincoln Plaza New York, NY 10023 - --------------------------------------------------------------------------------------------------------- John C. Danforth Partner Director Bryan Cave LLP One Metropolitan Square 211 North Broadway, Suite 3600 St. Louis, MO 63102 - --------------------------------------------------------------------------------------------------------- Burton A. Dole, Jr. Retired Chairman Director Nellcor Puritan Bennett P.O. Box 208 Pauma Valley, CA 92061 - --------------------------------------------------------------------------------------------------------- James R. Houghton Chairman of the Board Emeritus Director and Director Corning Incorporated 80 East Market Street, 2nd Floor Corning, NY 14830 - --------------------------------------------------------------------------------------------------------- Harry P. Kamen Chairman and Chief Director Executive Officer (Retired) Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - --------------------------------------------------------------------------------------------------------- Helene L. Kaplan Of Counsel Director Skadden Arps, Slate, Meagher & Flom Four Times Square New York, NY 10036 - --------------------------------------------------------------------------------------------------------- Charles M. Leighton Retired Chairman and Director Chief Executive Officer CML Group, Inc. P.O. Box 247 Bolton, MA 01740 - ---------------------------------------------------------------------------------------------------------
27 33
- --------------------------------------------------------------------------------------------------------- PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH METLIFE - --------------------------------------------------------------------------------------------------------- Stewart Nagler Vice Chairman of the Board and Vice Chairman of the Board and Chief Financial Officer Chief Financial Officer and MetLife, Inc. and Director Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 - --------------------------------------------------------------------------------------------------------- John J. Phelan, Jr. Retired Chairman and Director Chief Executive Officer New York Stock Exchange, Inc. P.O. Box 524 Locust Valley, NY 11560 - --------------------------------------------------------------------------------------------------------- Hugh B. Price President and Chief Executive Officer Director National Urban League, Inc. 120 Wall Street New York, NY 10005 - --------------------------------------------------------------------------------------------------------- Ruth J. Simmons, Ph.D. President Director Smith College College Hall 20 Northhampton, MA 01063 - --------------------------------------------------------------------------------------------------------- William C. Steere, Jr. Chairman of the Board Director Pfizer, Inc. 235 East 42nd Street New York, NY 10016 - ---------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ NAME OF OFFICER* POSITION WITH METROPOLITAN LIFE - ------------------------------------------------------------------------------------------ Robert H. Benmosche Chairman of the Board, President and Chief Executive Officer - ------------------------------------------------------------------------------------------ Gerald Clark Vice Chairman of the Board, Chief Investment Officer and Director - ------------------------------------------------------------------------------------------ Stewart G. Nagler Vice Chairman of the Board, Chief Financial Officer and Director - ------------------------------------------------------------------------------------------ Gary A. Beller Senior Executive Vice-President and General Counsel - ------------------------------------------------------------------------------------------ James M. Benson President, Individual Business; Chairman, Chief Executive Officer and President, New England Life Insurance Company - ------------------------------------------------------------------------------------------ Gwenn L. Carr Vice President and Secretary - ------------------------------------------------------------------------------------------ Daniel J. Cavanagh Executive Vice President - ------------------------------------------------------------------------------------------ C. Robert Henrikson President, Institutional Business - ------------------------------------------------------------------------------------------ Jeffrey J. Hodgman Executive Vice President - ------------------------------------------------------------------------------------------ Kevnau F. King Executive Vice President - ------------------------------------------------------------------------------------------ Leland Launer Senior Vice President and Treasurer - ------------------------------------------------------------------------------------------ Terence Lennon Executive Vice President - ------------------------------------------------------------------------------------------ David A. Levene Executive Vice President - ------------------------------------------------------------------------------------------ Catherine A. Rein Senior Executive Vice-President; President and Chief Executive Officer, Metropolitan Property and Casualty Insurance Company - ------------------------------------------------------------------------------------------ Stanley J. Talbi Senior Vice President and Chief Actuary - ------------------------------------------------------------------------------------------ William J. Toppeta President, Client Services and Chief Administrative Officer - ------------------------------------------------------------------------------------------ John H. Tweedie Senior Executive Vice-President - ------------------------------------------------------------------------------------------ Lisa M. Weber Executive Vice-President - ------------------------------------------------------------------------------------------ Judy E. Weiss Executive Vice-President and Chief Actuary - ------------------------------------------------------------------------------------------
- ------------------ * The principal occupation of each officer, except for the following officers, during the last five years has been as an officer of Metropolitan Life or an affiliate thereof. Robert H. Benmosche has been an officer of Metropolitan Life since September, 1995; prior thereto, he was an Executive Vice-President of Paine Webber. Lisa Weber has been an officer of Metropolitan Life since March 16, 1998; prior thereto, she was a Director of Diversity Strategies and Development and an Associate Director of Human Resources of Paine Webber. The business address of each officer is 1 Madison Avenue, New York, New York 10010. 28 34 INDEPENDENT AUDITORS' REPORT To the Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statements of assets and liabilities of the Metropolitan Life Separate Account UL including the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Putnam International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Aspen Growth, Invesco VIF High Yield, Invesco VIF Equity Income, Invesco VIF Real Estate Opportunity, Templeton International Stock, Putnam Large Cap Growth, State Street Research Aurora Small Cap Value, MetLife Mid Cap Stock Index, Zenith Davis Venture Value Series, Zenith Loomis Sayles Small Cap Series, and Alliance Series Growth & Income--Class B Portfolios, collectively (the "Separate Account"), including the schedule of investments as of December 31, 2000, and the related statements (i) of operations for the year ended December 31, 2000, the statements of changes in net assets for the years ended December 31, 2000, and 1999 of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Putnam International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Aspen Growth, Invesco VIF High Yield, Invesco VIF Equity Income, Invesco VIF Real Estate Opportunity, and Templeton International Stock Portfolios, and (ii) of operations and of changes in net assets for the period May 1, 2000 (commencement of operations) to December 31, 2000 of Putnam Large Cap Growth, July 5, 2000 (commencement of operations) to December 31, 2000 of State Street Research Aurora Small Cap Value, MetLife Mid Cap Stock Index, Zenith Davis Venture Value Series, and Zenith Loomis Sayles Small Cap Series, and September 30, 2000 (commencement of operations) to December 31, 2000 of Alliance Series Growth & Income--Class B Portfolio. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian and the depositor of the Separate Account. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Metropolitan Life Separate Account UL including the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Putnam International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Aspen Growth, Invesco VIF High Yield, Invesco VIF Equity Income, Invesco VIF Real Estate Opportunity, Templeton International Stock, Putnam Large Cap Growth, State Street Research Aurora Small Cap Value, MetLife Mid Cap Stock Index, Zenith Davis Venture Value Series, Zenith Loomis Sayles Small Cap Series, and Alliance Series Growth & Income--Class B Portfolios as of December 31, 2000, the results of its operations, and the changes in its net assets for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Tampa, Florida March 5, 2001 1 Metropolitan Life Separate Account UL STATEMENTS OF ASSETS AND LIABILITIES At December 31, 2000
State Street State Street State Street State Street State Street Research Research Research Research Research Aggressive Growth Income Money Market Diversified Growth Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------ ------------ ------------ ------------ ASSETS: Investments at Value (Note 2A): State Street Research Growth Portfolio (11,132,891 shares; cost $355,220,069).................... $404,569,260 -- -- -- -- State Street Research Income Portfolio (5,852,460 shares; cost $72,925,790)..................... -- $76,023,451 -- -- -- State Street Research Money Market Portfolio (2,123,403 shares; cost $22,943,841)..................... -- -- $21,535,554 -- -- State Street Research Diversified Portfolio (14,174,844 shares; cost $238,691,614).................... -- -- -- $260,533,637 -- State Street Research Aggressive Growth Portfolio (6,491,895 shares; cost $187,915,564).................... -- -- -- -- $205,338,640 MetLife Stock Index Portfolio (8,911,768 shares; cost $299,257,332).................... -- -- -- -- -- Putnam International Stock Portfolio (3,510,345 shares; cost $45,979,274)..................... -- -- -- -- -- Loomis Sayles High Yield Bond Portfolio (764,965 shares; cost $7,063,496)...................... -- -- -- -- -- Janus Mid Cap Portfolio (5,597,930 shares; cost $152,196,373)....... -- -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,946,497 shares; cost $39,757,787)..................... -- -- -- -- -- Scudder Global Equity Portfolio (1,358,760 shares; cost $18,080,858)..................... -- -- -- -- -- Harris Oakmark Large Cap Value Portfolio (212,277 shares; cost $1,874,391)...................... -- -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (415,456 shares; cost $5,696,226)...................... -- -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (557,103 shares; cost $7,546,090)...................... -- -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (1,955,967 shares; cost $19,431,048)..................... -- -- -- -- -- Morgan Stanley EAFE Index Portfolio (514,534 shares; cost $6,037,849)...................... -- -- -- -- -- Russell 2000 Index Portfolio (551,232 shares; cost $6,712,425)...................... -- -- -- -- -- Janus Aspen Growth Portfolio (189,582 shares; cost $6,048,279)...................... -- -- -- -- -- Invesco VIF High Yield Portfolio (1,075 shares; cost $12,273)..... -- -- -- -- -- Invesco VIF Equity Income Portfolio (670 shares; cost $14,429)......................... -- -- -- -- -- Invesco VIF Real Estate Opportunity Portfolio (11,304 shares; cost $109,760)... -- -- -- -- -- Templeton International Stock Portfolio (58,532 shares; cost $1,105,655)...................... -- -- -- -- -- Putnam Large Cap Growth Portfolio (130,298 shares; cost $1,124,530)...................... -- -- -- -- -- State Street Research Aurora Small Cap Value Portfolio (255,999 shares; cost $2,830,656). -- -- -- -- -- MetLife Mid Cap Stock Index Portfolio (201,463 shares; cost $2,086,257)...................... -- -- -- -- -- Zenith Davis Venture Value Series Portfolio (38,993 shares; cost $1,111,014)...................... -- -- -- -- Zenith Loomis Sayles Small Cap Series Portfolio (2,113 shares; cost $438,576)................... -- -- -- -- Alliance Series Growth & Income-- Class B Portfolio (2,480 shares; cost $55,171).................... -- -- -- -- -- ------------ ----------- ----------- ------------ ------------ Total Investments................. 404,569,260 76,023,451 21,535,554 260,533,637 205,338,640 Cash and Accounts Receivable...... 0 0 0 0 0 ------------ ----------- ----------- ------------ ------------ Total Assets...................... 404,569,260 76,023,451 21,535,554 260,533,637 205,338,640 LIABILITIES....................... 1,180,719 40,200 1,639 398,614 354,200 ------------ ----------- ----------- ------------ ------------ NET ASSETS........................ $403,388,541 $75,983,251 $21,533,915 $260,135,023 $204,984,440 ============ =========== =========== ============ ============
See Notes to Financial Statements. 2
Loomis Harris Neuberger Putnam Sayles T. Rowe Scudder Oakmark Berman MetLife International High Yield Janus Price Small Global Large Cap Partners Stock Index Stock Bond Mid Cap Cap Growth Equity Value Mid Cap Value Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------- ---------- ------------ ----------- ----------- ---------- ------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $314,228,935 -- -- -- -- -- -- -- -- $43,493,178 -- -- -- -- -- -- -- -- $6,884,686 -- -- -- -- -- -- -- -- $130,935,575 -- -- -- -- -- -- -- -- $42,134,910 -- -- -- -- -- -- -- -- $19,865,074 -- -- -- -- -- -- -- -- $2,078,196 -- -- -- -- -- -- -- -- $6,157,057 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------------ ----------- ---------- ------------ ----------- ----------- ---------- ---------- 314,228,935 43,493,178 6,884,686 130,935,575 42,134,910 19,865,074 2,078,196 6,157,057 951 0 29,056 0 0 19,688 27,817 0 ------------ ----------- ---------- ------------ ----------- ----------- ---------- ---------- 314,229,886 43,493,178 6,913,742 130,935,575 42,134,910 19,884,762 2,106,013 6,157,057 338,108 21,570 0 78,155 16,668 0 0 17,889 ------------ ----------- ---------- ------------ ----------- ----------- ---------- ---------- $313,891,778 $43,471,608 $6,913,742 $130,857,420 $42,118,242 $19,884,762 $2,106,013 $6,139,168 ============ =========== ========== ============ =========== =========== ========== ==========
See Notes to Financial Statements. 3 Metropolitan Life Separate Account UL STATEMENTS OF ASSETS AND LIABILITIES (Continued) At December 31, 2000
T. Rowe Price Large Cap Lehman Brothers Morgan Stanley Russell 2000 Growth Aggregate Bond EAFE Index Index Portfolio Index Portfolio Portfolio Portfolio ------------- --------------- -------------- ------------ ASSETS: Investments at Value (Note 2A): State Street Research Growth Portfolio (11,132,891 shares; cost $355,220,069)..... -- -- -- -- State Street Research Income Portfolio (5,852,460 shares; cost $72,925,790)........... -- -- -- -- State Street Research Money Market Portfolio (2,123,403 shares; cost $22,943,841)........... -- -- -- -- State Street Research Diversified Portfolio (14,174,844 shares; cost $238,691,614)..... -- -- -- -- State Street Research Aggressive Growth Portfolio (6,491,895 shares; cost $187,915,564).......... -- -- -- -- MetLife Stock Index Portfolio (8,911,768 shares; cost $299,257,332).......... -- -- -- -- Putnam International Stock Portfolio (3,510,345 shares; cost $45,979,274)........... -- -- -- -- Loomis Sayles High Yield Bond Portfolio (764,965 shares; cost $7,063,496)............ -- -- -- -- Janus Mid Cap Portfolio (5,597,930 shares; cost $152,196,373).......... -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,946,497 shares; cost $39,757,787)........... -- -- -- -- Scudder Global Equity Portfolio (1,358,760 shares; cost $18,080,858)........... -- -- -- -- Harris Oakmark Large Cap Value Portfolio (212,277 shares; cost $1,874,391)............ -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (415,456 shares; cost $5,696,226)....... -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (557,103 shares; cost $7,546,090)............ $7,203,340 -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (1,955,967 shares; cost $19,431,048)........... -- $19,364,071 -- -- Morgan Stanley EAFE Index Portfolio (514,534 shares; cost $6,037,849)............ -- -- $5,773,075 -- Russell 2000 Index Portfolio (551,232 shares; cost $6,712,425)............ -- -- -- $5,716,281 Janus Aspen Growth Portfolio (189,582 shares; cost $6,048,279)............ -- -- -- -- Invesco VIF High Yield Portfolio (1,075 shares; cost $12,273).. -- -- -- -- Invesco VIF Equity Income Portfolio (670 shares; cost $14,429).. -- -- -- -- Invesco VIF Real Estate Opportunity Portfolio (11,304 shares; cost $109,760).............. -- -- -- -- Templeton International Stock Portfolio (58,532 shares; cost $1,105,655)............ -- -- -- -- Putnam Large Cap Growth Portfolio (130,298 shares; cost $1,124,530)............ -- -- -- -- State Street Research Aurora Small Cap Value Portfolio (255,999 shares; cost $2,830,656)............ -- -- -- -- MetLife Mid Cap Stock Index Portfolio (201,463 shares; cost $2,086,257)............ -- -- -- -- Zenith Davis Venture Value Series Portfolio (38,993 shares; cost $1,111,014)............ -- -- -- -- Zenith Loomis Sayles Small Cap Series Portfolio (2,113 shares; cost $438,576). -- -- -- -- Alliance Series Growth & Income--Class B Portfolio (2,480 shares; cost $55,171).. -- -- -- -- ---------- ----------- ---------- ---------- Total Investments....... 7,203,340 19,364,071 5,773,075 5,716,281 Cash and Accounts Receivable............. 59,205 0 12,281 0 ---------- ----------- ---------- ---------- Total Assets............ 7,262,545 19,364,071 5,785,356 5,716,281 LIABILITIES............. 0 8,277 0 15,124 ---------- ----------- ---------- ---------- NET ASSETS.............. $7,262,545 $19,355,794 $5,785,356 $5,701,157 ========== =========== ========== ==========
See Notes to Financial Statements. 4
Invesco Invesco VIF Invesco VIF Templeton Putnam Janus VIF High Equity Real Estate International Large Cap Aspen Growth Yield Income Opportunity Stock Growth Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ------------ --------- --------- ----------- ------------- --------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $5,020,145 -- -- -- -- -- -- $10,822 -- -- -- -- -- -- $13,877 -- -- -- -- -- -- $114,734 -- -- -- -- -- -- $1,099,229 -- -- -- -- -- -- $951,174 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- ------- ------- -------- ---------- -------- 5,020,145 10,822 13,877 114,734 1,099,229 951,174 0 0 0 0 0 7,333 ---------- ------- ------- -------- ---------- -------- 5,020,145 10,822 13,877 114,734 1,099,229 958,507 0 0 0 0 0 0 ---------- ------- ------- -------- ---------- -------- $5,020,145 $10,822 $13,877 $114,734 $1,099,229 $958,507 ========== ======= ======= ======== ========== ========
See Notes to Financial Statements. 5 Metropolitan Life Separate Account UL STATEMENTS OF ASSETS AND LIABILITIES (Continued) At December 31, 2000
State Street Zenith Zenith Research Aurora Metlife Mid Davis Venture Loomis Sayles Small Cap Value Cap Stock Index Value Series Small Cap Series Portfolio Portfolio Portfolio Portfolio --------------- --------------- ------------- ---------------- ASSETS: Investments at Value (Note 2A): State Street Research Growth Portfolio (11,132,891 shares; cost $355,220,069)..... -- -- -- -- State Street Research Income Portfolio (5,852,460 shares; cost $72,925,790)........... -- -- -- -- State Street Research Money Market Portfolio (2,123,403 shares; cost $22,943,841)........... -- -- -- -- State Street Research Diversified Portfolio (14,174,844 shares; cost $238,691,614)..... -- -- -- -- State Street Research Aggressive Growth Portfolio (6,491,895 shares; cost $187,915,564).......... -- -- -- -- MetLife Stock Index Portfolio (8,911,768 shares; cost $299,257,332).......... -- -- -- -- Putnam International Stock Portfolio (3,510,345 shares; cost $45,979,274)........... -- -- -- -- Loomis Sayles High Yield Bond Portfolio (764,965 shares; cost $7,063,496)............ -- -- -- -- Janus Mid Cap Portfolio (5,597,930 shares; cost $152,196,373).......... -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,946,497 shares; cost $39,757,787)........... -- -- -- -- Scudder Global Equity Portfolio (1,358,760 shares; cost $18,080,858)........... -- -- -- -- Harris Oakmark Large Cap Value Portfolio (212,277 shares; cost $1,874,391)............ -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (415,456 shares; cost $5,696,226)............ -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (557,103 shares; cost $7,546,090)............ -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (1,955,967 shares; cost $19,431,048) .......... -- -- -- -- Morgan Stanley EAFE Index Portfolio (514,534 shares; cost $6,037,849)............ -- -- -- -- Russell 2000 Index Portfolio (551,232 shares; cost $6,712,425)............ -- -- -- -- Janus Aspen Growth Portfolio (189,582 shares; cost $6,048,279)............ -- -- -- -- Invesco VIF High Yield Portfolio (1,075 shares; cost $12,273).. -- -- -- -- Invesco VIF Equity Income Portfolio (670 shares; cost $14,429).. -- -- -- -- Invesco VIF Real Estate Opportunity Portfolio (11,304 shares; cost $109,760).............. -- -- -- -- Templeton International Stock Portfolio (58,532 shares; cost $1,105,655)............ -- -- -- -- Putnam Large Cap Growth Portfolio (130,298 shares; cost $1,124,530)............ -- -- -- -- State Street Research Aurora Small Cap Value Portfolio (255,999 shares; cost $2,830,656)............ $3,133,424 -- -- -- MetLife Mid Cap Stock Index Portfolio (201,463 shares; cost $2,086,257)............ -- $2,143,563 -- -- Zenith Davis Venture Value Series Portfolio (38,993 shares; cost $1,111,014)............ -- -- $1,138,605 -- Zenith Loomis Sayles Small Cap Series Portfolio (2,113 shares; cost $438,576).............. -- -- -- $444,556 Alliance Series Growth & Income--Class B Portfolio (2,480 shares; cost $55,171)............... -- -- -- -- ---------- ---------- ---------- -------- Total Investments....... 3,133,424 2,143,563 1,138,605 444,556 Cash and Accounts Receivable............. 0 2,628 0 0 ---------- ---------- ---------- -------- Total Assets............ 3,133,424 2,146,191 1,138,605 444,556 LIABILITIES............. 2,468 0 1,826 574 ---------- ---------- ---------- -------- NET ASSETS.............. $3,130,956 $2,146,191 $1,136,779 $443,982 ========== ========== ========== ========
See Notes to Financial Statements. 6 Metropolitan Life Separate Account UL STATEMENTS OF ASSETS AND LIABILITIES (Continued) At December 31, 2000
Alliance Series Growth & Income--Class B Portfolio Total --------------- -------------- ASSETS: Investments at Value (Note 2A): State Street Research Growth Portfolio (11,132,891 shares; cost $355,220,069)......... -- $ 404,569,260 State Street Research Income Portfolio (5,852,460 shares; cost $72,925,790)........... -- 76,023,461 State Street Research Money Market Portfolio (2,123,403 shares; cost $22,943,841)........... -- 21,535,554 State Street Research Diversified Portfolio (14,174,844 shares; cost $238,691,614)......... -- 260,533,637 State Street Research Aggressive Growth Portfolio (6,491,895 shares; cost $187,915,564).................................. -- 205,338,640 MetLife Stock Index Portfolio (8,911,768 shares; cost $299,257,332)............................. -- 314,228,935 Putnam International Stock Portfolio (3,510,345 shares; cost $45,979,274)...................... -- 43,493,178 Loomis Sayles High Yield Bond Portfolio (764,965 shares; cost $7,063,496)....................... -- 6,884,686 Janus Mid Cap Portfolio (5,597,980 shares; cost $152,196,373).................................. -- 130,935,575 T. Rowe Price Small Cap Growth Portfolio (2,946,497 shares; cost $39,757,787)........... -- 42,134,910 Scudder Global Equity Portfolio (1,358,760 shares; cost $18,080,858)...................... -- 19,865,074 Harris Oakmark Large Cap Value Portfolio (212,277 shares; cost $1,874,391).............. -- 2,078,196 Neuberger Berman Partners Mid Cap Value Portfolio (415,456 shares; cost $5,696,226).... -- 6,167,057 T. Rowe Price Large Cap Growth Portfolio (557,103 shares; cost $7,546,090).............. -- 7,203,340 Lehman Brothers Aggregate Bond Index Portfolio (1,955,967 shares; cost $19,431,048)........... -- 19,364,071 Morgan Stanley EAFE Index Portfolio (514,534 shares; cost $6,037,849)....................... -- 5,773,075 Russell 2000 Index Portfolio (551,232 shares; cost $6,712,425)............................... -- 5,716,281 Janus Aspen Growth Portfolio (189,582 shares; cost $6,048,279)............................... -- 5,020,145 Invesco VIF High Yield Portfolio (1,075 shares; cost $12,273).................................. -- 10,822 Invesco VIF Equity Income Portfolio (670 shares; cost $14,429).................................. -- 13,877 Invesco VIF Real Estate Opportunity Portfolio (11,304 shares; cost $109,760)................. -- 114,734 Templeton International Stock Portfolio (58,532 shares; cost $1,105,655)....................... -- 1,099,229 Putnam Large Cap Growth Portfolio (130,298 shares; cost $1,124,530)....................... -- 951,174 State Street Research Aurora Small Cap Value Portfolio (255,999 shares; cost $2,830,656).... -- 3,133,424 MetLife Mid Cap Stock Index Portfolio (201,463 shares; cost $2,086,257)....................... -- 2,143,563 Zenith Davis Venture Value Series Portfolio (38,993 shares; cost $1,111,014)............... -- 1,138,605 Zenith Loomis Sayles Small Cap Series Portfolio (2,113 shares; cost $438,576).................. -- 444,556 Alliance Series Growth & Income--Class B Portfolio (2,480 shares; cost $55,171) ........ $57,873 57,873 ------- -------------- Total Investments............................... 57,873 1,585,962,922 Cash and Accounts Receivable.................... 0 158,959 ------- -------------- Total Assets.................................... 57,873 1,586,121,881 LIABILITIES..................................... 0 2,476,031 ------- -------------- NET ASSETS...................................... $57,873 $1,583,645,850 ======= ==============
See Notes to Financial Statements. 7 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2000 ----------------------------------------------------------------- State Street State Street State Street State Street State Street Research Research Research Research Research Aggressive Growth Income Money Market Diversified Growth Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME: Income: Dividends (Note 3)..... $ 4,838,821 $ 3,139 $1,677,962 $1,174,688 $ 27,463,699 Expenses: Mortality and expense charges (Note 4).............. 3,798,303 557,064 291,782 2,258,802 1,992,343 ------------ ---------- ---------- ---------- ------------ Net investment income (loss)................. 1,040,518 (553,925) 1,386,180 (1,084,114) 25,471,356 ------------ ---------- ---------- ---------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions........... 5,846,334 (764,188) 1,059,353 1,585,197 3,369,764 Change in unrealized (depreciation) appreciation of investments............ (37,904,600) 8,375,071 (454,099) (360,101) (48,026,970) ------------ ---------- ---------- ---------- ------------ Net realized and unrealized (loss) gain on investments......... (32,058,266) 7,610,883 605,254 1,225,096 (44,657,206) ------------ ---------- ---------- ---------- ------------ NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(31,017,748) $7,056,958 $1,991,434 $ 140,982 $(19,185,850) ============ ========== ========== ========== ============
See Notes to Financial Statements. 8
---------------------------------------------------------------------------------------- Loomis T. Rowe Harris Putnam Sayles Price Scudder Oakmark MetLife International High Yield Janus Small Cap Global Large Cap Stock Index Stock Bond Mid Cap Growth Equity Value Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio ----------- ------------- ---------- --------- --------- --------- --------- $ 13,335,508 $ 274,114 $ 2,401 $ 11,303,876 $ 0 $ 64,757 $ 45,533 2,457,289 377,435 50,458 1,274,377 307,077 142,655 8,356 ------------ ----------- --------- ------------ ----------- --------- -------- 10,878,219 (103,321) (48,057) 10,029,499 (307,077) (77,898) 37,177 ------------ ----------- --------- ------------ ----------- --------- -------- 6,159,583 309,181 (62,427) 3,280,184 759,159 423,877 (27,497) (49,619,601) (5,241,506) (65,158) (70,128,825) (4,955,737) (702,165) 217,646 ------------ ----------- --------- ------------ ----------- --------- -------- (43,460,018) (4,932,325) (127,585) (66,848,641) (4,196,578) (278,288) 190,149 ------------ ----------- --------- ------------ ----------- --------- -------- $(32,581,799) $(5,035,646) $(175,642) $(56,819,142) $(4,503,655) $(356,186) $227,326 ============ =========== ========= ============ =========== ========= ========
9 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS (Continued)
For the Year Ended December 31, 2000 ---------------------------------------------------------------- T. Rowe Lehman Morgan Neuberger Price Brothers Stanley Berman Partners Large Cap Aggregate Bond EAFE Russell Mid Cap Growth Index Index 2000 Index Value Portfolio Portfolio Portfolio Portfolio Portfolio --------------- --------- -------------- --------- ----------- INVESTMENT INCOME: Income: Dividends (Note 3)..... $ 192,122 $ 212,097 $1,151,414 $ 90,887 $ 797,642 Expenses: Mortality and expense charges (Note 4).............. 16,357 28,064 51,779 22,497 21,802 --------- --------- ---------- --------- ----------- Net investment income (loss)................. 175,765 184,033 1,099,635 68,390 775,840 --------- --------- ---------- --------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions........... 28,891 9,246 61,931 (86,470) (27,586) Change in unrealized (depreciation) appreciation of investments............ 444,118 (515,437) (39,445) (425,063) (1,037,181) --------- --------- ---------- --------- ----------- Net realized and unrealized (loss) gain on investments......... 473,009 (506,191) 22,486 (511,533) (1,064,767) --------- --------- ---------- --------- ----------- NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $648,774 $(322,158) $1,122,121 $(443,143) $ (288,927) ========= ========= ========== ========= ===========
See Notes to Financial Statements. 10
For the Period For the Period May 1, 2000 July 5, 2000 to to December 31, 2000 December 31, 2000 - ------------------------------------------------------------------------------------------------ Invesco Invesco Invesco VIF Templeton State Street Janus Aspen VIF High VIF Equity Real Estate International Research Aurora Growth Yield Income Opportunity Stock Putman Large Cap Small Cap Value Portfolio Portfolio Portfolio Portfolio Portfolio Growth Portfolio Portfolio - ----------- --------- ---------- ----------- ------------- ---------------- --------------- $ 191,433 $ 0 $ 783 $ 0 $ 34,323 $ 0 $ 20,669 19,763 42 58 288 3,352 1,713 3,697 - ----------- ------- ----- ------ -------- --------- -------- 171,670 (42) 725 (288) 30,971 (1,713) 16,972 - ----------- ------- ----- ------ -------- --------- -------- (11,878) (11) 18 445 (35,953) (1,766) 3,082 (1,038,841) (1,445) (596) 4,890 (6,907) (173,356) 302,768 - ----------- ------- ----- ------ -------- --------- -------- (1,050,719) (1,456) (578) 5,335 (42,860) (175,122) 305,850 - ----------- ------- ----- ------ -------- --------- -------- $ (879,049) $(1,498) $147 $5,047 $(11,889) $(176,835) $322,822 =========== ======= ===== ====== ======== ========= ========
11 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS (Continued)
For the Period July 5, 2000 to December 31, 2000 ---------------------------------------- MetLife Mid Cap Zenith Zenith Stock Davis Venture Loomis Sayles Index Value Series Small Cap Series Portfolio Portfolio Portfolio --------- ------------- ---------------- INVESTMENT INCOME: Income: Dividends (Note 3).................. $ 8,945 $ 0 $ 0 Expenses: Mortality and expense charges (Note 4)........................... 1,923 1,697 629 ------- ------- ------ Net investment income (loss)......... 7,022 (1,697) (629) ------- ------- ------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions............... (300) (482) (42) Change in unrealized (depreciation) appreciation of investments......... 57,307 27,591 5,980 ------- ------- ------ Net realized and unrealized (loss) gain on investments................. 57,007 27,109 5,938 ------- ------- ------ NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $64,029 $25,412 $5,309 ======= ======= ======
See Notes to Financial Statements. 12 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS (Continued)
Alliance Series Growth & Income-- Class B Portfolio Total ----------------- ------------- INVESTMENT INCOME: Income: Dividends (Note 3).......................... $ 0 $ 62,884,813 Expenses: Mortality and expense charges (Note 4)................................... 0 13,689,602 ------ ------------- Net investment income (loss)................. 0 49,195,211 ------ ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions................................ 0 21,877,645 Change in unrealized (depreciation) appreciation of investments................. 2,702 (211,258,960) ------ ------------- Net realized and unrealized (loss) gain on investments................................. 2,702 (189,381,315) ------ ------------- NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $2,702 $(140,186,104) ====== =============
13 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS
State Street Reasearch State Street Reasearch State Street Reasearch Growth Portfolio Income Portfolio Money Market Portfolio -------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 1,040,518 $ 40,828,191 $ (553,925) $ 3,681,974 $ 1,386,180 $ 1,296,852 Net realized gain (loss) from security transactions.......... 5,846,334 3,593,964 (764,188) 15,187 1,059,353 245,673 Change in unrealized (depreciation) appreciation of investments........... (37,904,600) 16,515,105 8,375,071 (5,496,396) (454,099) (275,023) ------------ ------------ ----------- ----------- ------------ ----------- Net (decrease) increase in net assets resulting from operations............ (31,017,748) 60,937,260 7,056,958 (1,799,235) 1,991,434 1,267,502 ------------ ------------ ----------- ----------- ------------ ----------- From capital transactions: Net premiums........... 78,775,448 76,267,713 16,247,550 15,797,917 35,316,006 35,768,800 Redemptions............ (15,714,936) (15,563,840) (2,164,427) (1,719,595) (18,249,957) (296,905) Net portfolio transfers............. (7,049,932) 3,590,588 (4,736,604) 2,922,342 (27,922,080) (23,898,442) Other net transfers.... (41,272,460) (38,125,701) (6,051,666) (6,009,960) (2,674,970) (2,027,635) ------------ ------------ ----------- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from capital transactions.......... 14,738,120 26,168,760 3,294,853 10,990,704 (13,531,001) 9,545,818 ------------ ------------ ----------- ----------- ------------ ----------- NET CHANGE IN NET ASSETS................. (16,279,628) 87,106,020 10,351,811 9,191,469 (11,539,567) 10,813,320 NET ASSETS--BEGINNING OF PERIOD................. 419,668,169 332,562,149 65,631,440 56,439,971 33,073,482 22,260,162 ------------ ------------ ----------- ----------- ------------ ----------- NET ASSETS--END OF PERIOD................. $403,388,541 $419,668,169 $75,983,251 $65,631,440 $ 21,533,915 $33,073,482 ============ ============ =========== =========== ============ ===========
See Notes to Financial Statements. 14
State Street Research Putnam State Street Research Aggressive Growth MetLife International Stock Diversified Portfolio Portfolio Stock Index Portfolio Portfolio - --------------------------- -------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 2000 1999 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (1,084,114) $ 18,825,455 $ 25,471,356 $ 3,037,862 $ 10,878,219 $ 10,353,423 $ (103,321) $ 6,403,093 1,585,197 743,624 3,369,764 1,280,373 6,159,583 3,899,836 309,181 528,185 (360,101) (2,237,161) (48,026,970) 47,914,985 (49,619,601) 24,029,258 (5,241,506) (1,137,521) - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- 140,982 17,331,918 (19,185,850) 52,233,220 (32,581,799) 38,282,517 (5,035,646) 5,793,757 - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- 53,773,281 54,466,186 41,898,360 41,977,555 101,155,153 80,432,444 9,900,638 8,765,614 (9,860,611) (8,542,813) (10,429,472) (6,935,090) (8,709,802) (5,037,136) (2,135,289) (1,805,287) (3,492,574) 2,267,794 (209,434) (8,586,687) 32,416,473 20,459,060 760,648 (1,507,125) (28,128,760) (26,640,820) (21,759,150) (18,101,172) (39,683,105) (31,708,703) (3,943,304) (3,575,131) - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- 12,291,336 21,550,347 9,500,304 8,354,606 85,178,719 64,145,665 4,582,693 1,878,071 - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- 12,432,318 38,882,265 (9,685,546) 60,587,826 52,596,920 102,428,182 (452,953) 7,671,828 247,702,705 208,820,440 214,669,986 154,082,160 261,294,858 158,866,676 43,924,561 36,252,733 - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- $260,135,023 $247,702,705 $204,984,440 $214,669,986 $313,891,778 $261,294,858 $43,471,608 $43,924,561 ============ ============ ============ ============ ============ ============ =========== ===========
15 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
T. Rowe Price Loomis Sayles Janus Small Cap Growth High Yield Bond Portfolio Mid Cap Portfolio Portfolio ------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ (48,057) $ 351,127 $ 10,029,499 $ 4,984,315 $ (307,077) $ (159,812) Net realized gain (loss) from security transactions.......... (62,427) (159,077) 3,280,184 1,140,427 759,159 41,394 Change in unrealized (depreciation) appreciation of investments........... (65,158) 384,776 (70,128,825) 44,344,823 (4,955,737) 6,830,580 ---------- ---------- ------------ ------------ ----------- ----------- Net (decrease) increase in net assets resulting from operations ........... (175,642) 576,826 (56,819,142) 50,469,565 (4,503,655) 6,712,162 ---------- ---------- ------------ ------------ ----------- ----------- From capital transactions: Net premiums........... 2,272,880 1,766,270 64,927,917 31,140,404 13,173,661 10,707,741 Redemptions............ (256,031) (387,694) (3,404,065) (1,283,943) (960,930) (556,621) Net portfolio transfers............. 762,530 1,046,383 39,706,625 24,344,237 7,018,243 5,288,531 Other net transfers.... (644,203) (587,488) (26,632,666) (12,718,059) (4,758,398) (3,307,953) ---------- ---------- ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.......... 2,135,176 1,837,471 74,597,811 41,482,639 14,472,576 12,131,698 ---------- ---------- ------------ ------------ ----------- ----------- NET CHANGE IN NET ASSETS................. 1,959,534 2,414,297 17,778,669 91,952,204 9,968,921 18,843,860 NET ASSETS--BEGINNING OF PERIOD................. 4,954,208 2,539,911 113,078,751 21,126,547 32,149,321 13,305,461 ---------- ---------- ------------ ------------ ----------- ----------- NET ASSETS--END OF PERIOD................. $6,913,742 $4,954,208 $130,857,420 $113,078,751 $42,118,242 $32,149,321 ========== ========== ============ ============ =========== ===========
See Notes to Financial Statements. 16
T. Rowe Price Scudder Harris Oakmark Neuberger Berman Partners Large Cap Growth Global Equity Portfolio Large Cap Value Portfolio Mid Cap Value Portfolio Portfolio ---------------------------- ------------------------- ------------------------------ -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (77,898) $ 399,116 $ 37,177 $ 2,358 $ 175,765 $ 12,881 $ 184,033 $ 782 423,877 272,213 (27,497) (5,489) 28,891 679 9,246 2,027 (702,165) 1,937,990 217,646 (13,841) 444,118 16,713 (515,437) 172,687 ----------- ----------- ---------- -------- -------------- ------------ ----------- ---------- (356,186) 2,609,319 227,326 (16,972) 648,774 30,273 (322,158) 175,496 ----------- ----------- ---------- -------- -------------- ------------ ----------- ---------- 6,536,768 4,574,226 715,820 125,384 1,424,997 162,181 2,941,543 141,433 (543,240) (541,665) (22,511) (8,780) (48,928) 0 (19,075) 0 1,878,567 985,125 1,142,472 224,137 4,051,096 433,203 4,471,715 1,037,195 (2,129,044) (1,431,966) (296,592) 15,729 (529,061) (33,367) (1,062,875) (100,729) ----------- ----------- ---------- -------- -------------- ------------ ----------- ---------- 5,743,051 3,585,720 1,539,189 356,470 4,898,104 562,017 6,331,308 1,077,899 ----------- ----------- ---------- -------- -------------- ------------ ----------- ---------- 5,386,865 6,195,039 1,766,515 339,498 5,546,878 592,290 6,009,150 1,253,395 14,497,897 8,302,858 339,498 0 592,290 0 1,253,395 0 ----------- ----------- ---------- -------- -------------- ------------ ----------- ---------- $19,884,762 $14,497,897 $2,106,013 $339,498 $ 6,139,168 $ 592,290 $ 7,262,545 $1,253,395 =========== =========== ========== ======== ============== ============ =========== ==========
17 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Lehman Brothers Aggregate Morgan Stanley Russell 2000 Bond Index Portfolio EAFE Index Portfolio Index Portfolio -------------------------- ------------------------- ------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 1,099,635 $ 22,843 $ 68,390 $ 11,037 $ 775,840 $ 12,267 Net realized gain (loss) from security transactions.......... 61,931 (1,189) (86,470) 92,428 (27,586) 10,610 Change in unrealized (depreciation) appreciation of investments........... (39,445) (27,533) (425,063) 160,288 (1,037,181) 41,036 ----------- -------- ---------- ---------- ---------- -------- Net (decrease) increase in net assets resulting from operations............ 1,122,121 (5,879) (443,143) 263,753 (288,927) 63,913 ----------- -------- ---------- ---------- ---------- -------- From capital transactions: Net premiums........... 6,001,873 93,732 1,984,111 139,276 2,510,031 214,532 Redemptions............ (253,963) (1,012) (25,611) (1,812) (45,875) (1,472) Net portfolio transfers............. 12,581,907 484,526 3,730,891 862,477 3,956,271 219,845 Other net transfers.... (657,185) (10,326) (682,554) (42,032) (882,331) (44,830) ----------- -------- ---------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from capital transactions.......... 17,672,632 566,920 5,006,837 957,909 5,538,096 388,075 ----------- -------- ---------- ---------- ---------- -------- NET CHANGE IN NET ASSETS................. 18,794,753 561,041 4,563,694 1,221,662 5,249,169 451,988 NET ASSETS--BEGINNING OF PERIOD................. 561,041 0 1,221,662 0 451,988 0 ----------- -------- ---------- ---------- ---------- -------- NET ASSETS--END OF PERIOD................. $19,355,794 $561,041 $5,785,356 $1,221,662 $5,701,157 $451,988 =========== ======== ========== ========== ========== ========
See Notes to Financial Statements. 18
Janus Aspen Invesco VIF High Invesco VIF Equity Invesco VIF Real Estate Growth Portfolio Yield Portfolio Income Portfolio Opportunity Portfolio ----------------------------------------------------- ------------------------- ------------------------- For the For the For the For the Period Period Period Period For the Year May 3, 1999 For the Year May 3, 1999 For the Year May 3, 1999 For the Year May 3, 1999 Ended to Ended to Ended to Ended to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 171,670 $ (61) $ (42) $ 0 $ 725 $ 0 $ (288) $ (1) (11,878) 79 (11) 0 18 0 445 0 (1,038,841) 10,708 (1,445) (6) (596) 45 4,890 84 ----------- ------- ------- ------ ------- ------ -------- ------ (879,049) 10,726 (1,498) (6) 147 45 5,047 83 ----------- ------- ------- ------ ------- ------ -------- ------ 1,494,340 99 2,194 0 7,244 0 1,795 0 (102) 0 0 0 0 0 0 0 4,654,955 86,070 7,138 3,236 1,027 5,802 107,017 1,524 (346,372) (522) (239) (3) (413) 25 (709) (23) ----------- ------- ------- ------ ------- ------ -------- ------ 5,802,821 85,647 9,093 3,233 7,858 5,827 108,103 1,501 ----------- ------- ------- ------ ------- ------ -------- ------ 4,923,772 96,373 7,595 3,227 8,005 5,872 113,150 1,584 96,373 0 3,227 0 5,872 0 1,584 0 ----------- ------- ------- ------ ------- ------ -------- ------ $ 5,020,145 $96,373 $10,822 $3,227 $13,877 $5,872 $114,734 $1,584 =========== ======= ======= ====== ======= ====== ======== ======
19 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Templeton International Putnam Large Cap Stock Portfolio Growth Portfolio ------------------------- ---------------- For the Period For the Year May 3, 1999 For the Period Ended to May 1, 2000 to December 31, December 31, December 31, 2000 1999 2000 ------------ ------------ ---------------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)....... $ 30,971 $ (5) $ (1,713) Net realized gain (loss) from security transactions............. (35,953) 32 (1,766) Change in unrealized (depreciation) appreciation of investments....... (6,907) 481 (173,356) ---------- ------ ---------- Net (decrease) increase in net assets resulting from operations.. (11,889) 508 (176,835) ---------- ------ ---------- From capital transactions: Net premiums....................... 199,820 1,166 306,843 Redemptions........................ (1,160) 0 (5,695) Net portfolio transfers............ 922,250 5,208 915,075 Other net transfers................ (16,624) (50) (80,881) ---------- ------ ---------- Net increase (decrease) in net assets resulting from capital transactions...................... 1,104,286 6,324 1,135,342 ---------- ------ ---------- NET CHANGE IN NET ASSETS............ 1,092,397 6,832 958,507 NET ASSETS--BEGINNING OF PERIOD..... 6,832 0 0 ---------- ------ ---------- NET ASSETS--END OF PERIOD........... $1,099,229 $6,832 $ 958,507 ========== ====== ==========
See Notes to Financial Statements. 20
State Street Research Aurora MetLife Mid Cap Zenith Davis Venture Zenith Loomis Sayles Small Small Cap Value Portfolio Stock Index Portfolio Value Series Portfolio Cap Series Portfolio - ---------------------------- --------------------- ---------------------- -------------------------- For the Period For the Period For the Period For the Period July 5, 2000 to July 5, 2000 to July 5, 2000 to July 5, 2000 to December 31, 2000 December 31, 2000 December 31, 2000 December 31, 2000 - ---------------------------- --------------------- ---------------------- -------------------------- $ 16,972 $ 7,022 $ (1,697) $ (629) 3,082 (300) (482) (42) 302,768 57,307 27,591 5,980 ---------- ---------- ---------- -------- 322,822 64,029 25,412 5,309 ---------- ---------- ---------- -------- 335,643 240,407 199,454 62,643 (11,356) (8,675) (6,528) (6,573) 2,585,881 1,949,602 973,687 403,213 (102,034) (99,172) (55,246) (20,610) ---------- ---------- ---------- -------- 2,808,134 2,082,162 1,111,367 438,673 ---------- ---------- ---------- -------- 3,130,956 2,146,191 1,136,779 443,982 0 0 0 0 ---------- ---------- ---------- -------- $3,130,956 $2,146,191 $1,136,779 $443,982 ========== ========== ========== ========
21 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Alliance Series Growth & Income-- Class B Portfolio Total -------------------- ----------------------------------- For the Period For the Year For the Year September 30, 2000 Ended Ended to December 31, 2000 December 31, 2000 December 31, 1999 -------------------- ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 0 $ 49,195,211 $ 90,063,697 Net realized gain (loss) from security transactions.......... 0 21,877,645 11,700,976 Change in unrealized (depreciation) appreciation of investments........... 2,702 (211,258,960) 133,172,078 ------- -------------- -------------- Net (decrease) increase in net assets resulting from operations............ 2,702 (140,186,104) 234,936,751 ------- -------------- -------------- From capital transactions: Net premiums........... 0 442,406,420 362,542,673 Redemptions............ 0 (72,884,812) (42,683,665) Net portfolio transfers............. 54,402 81,641,061 30,275,029 Other net transfers.... 769 (182,509,855) (144,450,716) ------- -------------- -------------- Net increase (decrease) in net assets resulting from capital transactions.......... 55,171 268,652,814 205,683,321 ------- -------------- -------------- NET CHANGE IN NET ASSETS................. 57,873 128,466,710 440,620,072 NET ASSETS--BEGINNING OF PERIOD................. 0 1,455,179,140 1,014,559,068 ------- -------------- -------------- NET ASSETS--END OF PERIOD................. $57,873 $1,583,645,850 $1,455,179,140 ======= ============== ==============
See Notes to Financial Statements. 22 Metropolitan Life Separate Account UL NOTES TO FINANCIAL STATEMENTS December 31, 2000 1. BUSINESS Metropolitan Life Separate Account UL (the "Separate Account") is a multi- division unit investment trust registered under the Investment Company Act of 1940, as amended. The six divisions are UL II, IVUL, GVUL, UL2001, VAI, and VABR. The Separate Account presently consists of twenty-eight investment portfolios used to support variable universal life insurance policies. The assets in each portfolio are invested in shares of the corresponding portfolio of the Metropolitan Series Fund, Inc., the New England Zenith Series Fund, Inc., the Templeton Variable Product Series Fund, the Invesco Variable Investment Fund, Inc., the Janus Aspen Series Fund, and the Alliance Variable Product Series Fund, collectively, (the "Funds"). The Metropolitan Series Fund, Inc. and the New England Zenith Series Fund, Inc. are both affiliated with Metropolitan Life Insurance Company ("Metropolitan Life"). Each portfolio has varying investment objectives relative to growth of capital and income. The Separate Account was formed by "Metropolitan Life", on December 13, 1988 and registered as a unit investment trust on January 5, 1990. The assets of the Separate Account are the property of Metropolitan Life. On May 1, 2000, operations commenced for one new investment portfolio added to the Separate Account on that date, the Putnam Large Cap Growth Portfolio. On July 5, 2000 operations commenced for four new investment portfolios added to the Separate Account on that date: State Street Research Aurora Small Cap Value Portfolio, MetLife Mid Cap Stock Index Portfolio, Zenith Davis Venture Value Series Portfolio, and the Zenith Loomis Sayles Small Cap Series Portfolio. On September 30, 2000, operations commenced for one new investment portfolio added to the Separate Account on that date, Alliance Series Growth & Income-- Class B Portfolio. On May 3, 1999, operations commenced for the five new investment portfolios added to the Separate Account on that date: the Janus Aspen Growth Portfolio, the Invesco VIF High Yield Portfolio, the Invesco VIF Equity Income Portfolio, the Invesco VIF Real Estate Opportunity Portfolio, and the Templeton International Stock. 2. SIGNIFICANT ACCOUNTING POLICIES A. Valuation of Investments Investments are made in the portfolios of the Funds and are valued at the reported net asset values of such portfolios. A summary of investments of the twenty-eight designated portfolios of the Funds in which the six investment divisions of the Separate Account invest as of December 31, 2000 is included as Note 7. B. Security Transactions Purchases and sales are recorded on the trade date basis. Realized gains and losses on sales of investments are computed on the basis of identified cost of the investment sold. Income from dividends, and gains from realized gain distributions, are recorded on the ex-distribution date. C. Federal Income Taxes The operations of the Separate Account are included in the Federal income tax return of Metropolitan Life, which is taxed as a life insurance company under the provisions of the Internal Revenue Code (IRC). Under the current provisions of the IRC, Metropolitan Life does not expect to incur Federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the contracts. Based of this, no charge is being made currently to the Separate Account for Federal income taxes. Metropolitan Life will review periodically the status of this policy in the event of changes in the tax law. A charge may be made in future years for any Federal income taxes that would be attributable to the contracts. 23 NOTES TO FINANCIAL STATEMENTS--(Continued) 2. SIGNIFICANT ACCOUNTING POLICIES--(Continued) D. Net Premiums Metropolitan Life deducts a sales load and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In the case of certain policies, Metropolitan Life also deducts a Federal income tax charge before amounts are allocated to the Separate Account. The Federal income tax charge is imposed in connection with certain policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. E. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United State of America requires management to make estimates that affect amounts reported therein. Actual results could differ from these estimates. 3. DIVIDENDS On September 13, 2000 and December 28, 2000, the Metropolitan Series Fund, Inc. declared dividends for all shareholders of record on September 13, 2000 and December 28, 2000, respectively. On June 29, 2000, July 28, 2000, and December 28, 2000, the Janus Aspen Series Fund declared dividends for all shareholders of record on June 29, 2000, July 28, 2000, and December 28, 2000. On December 28, 2000, the Invesco Variable Investment Fund, Inc. declared dividends for all shareholders of record on December 28, 2000. On February 28, 2000 and April 26, 2000, the Templeton Variable Product Series Fund declared dividends for all shareholders of record on February 28, 2000 and April 26, 2000, respectively. The amount of dividends received by the Separate Account was $62,884,813. The dividends were paid to Metropolitan Life on September 14, 2000 and December 29, 2000 by the Metropolitan Series Fund, Inc., on June 30, 2000, July 29, 2000, and December 29, 2000 by the Janus Aspen Series Fund, on December 29, 2000 by the Invesco Variable Investment Fund, Inc., and on February 29, 2000 and April 27, 2000 by the Templeton Variable Products Series Fund. The dividends received were immediately reinvested in additional shares of the portfolios in which the investment portfolios invest. As a result of this reinvestment, the number of shares of the Funds, held by each of the twenty-eight investment portfolios increased by the following:
Portfolio Shares --------- ------- State Street Research Growth Portfolio.............................. 115,046 State Street Research Income Portfolio.............................. 254 State Street Research Money Market Portfolio........................ 165,336 State Street Research Diversified Portfolio......................... 60,302 State Street Research Aggressive Growth Portfolio................... 697,225 MetLife Stock Index Portfolio....................................... 364,172 Putnam International Stock Portfolio................................ 2,135 Loomis Growth Sayles High Yield Bond Portfolio...................... 245 Janus Mid Cap Portfolio............................................. 349,016 T. Rowe Price Small Cap Growth Portfolio............................ 0 Scudder Global Equity Portfolio..................................... 4,447 Harris Oakmark Large Cap Value Portfolio............................ 4,823 Neuberger Berman Partners Mid Cap Value Portfolio................... 12,901 T. Rowe Price Large Cap Growth Portfolio............................ 16,053 Lehman Brothers Aggregate Bond Index Portfolio...................... 116,415 Morgan Stanley EAFE Index Portfolio................................. 8,150 Russell 2000 Index Portfolio........................................ 75,117 Janus Aspen Growth Portfolio........................................ 12,531 Putnam Large Cap Growth Portfolio................................... 0 State Street Research Aurora Small Cap Value Portfolio.............. l,686 MetLife Mid Cap Stock Index Portfolio............................... 826 Zenith Davis Venture Value Series Portfolio......................... 0 Zenith Loomis Sayles Small Cap Series Portfolio..................... 1
24 NOTES TO FINANCIAL STATEMENTS--(Continued) 3. DIVIDENDS--(Continued)
Portfolio Shares --------- ------ Invesco VIF High Yield Portfolio..................................... 10 Invesco VIF Equity Income Portfolio.................................. 40 Invesco VIF Real Estate Opportunity Portfolio........................ 27 Templeton International Stock Portfolio.............................. 1,817 Alliance Series Growth & Income-Class B Portfolio.................... 0
4. EXPENSES With respect to assets in the Separate Account that support certain policies, Metropolitan Life deducts a charge from the assets of the Separate Account for the assumption of mortality and expense risks. This charge varies by policy type but will be higher than an effective annual rate of .90% of the average daily value of the net assets of the monthly anniversary value of the net assets in the Separate Account, which are attributable to such policies. 5. CHANGE OF FUND NAME Effective January 24, 2000, Putnam became the sub-investment manager of the Putnam International Stock Portfolio (formerly Santander International Stock Portfolio) of the Metropolitan Series Fund, Inc. Effective February 15, 2000, Invesco VIF Realty Portfolio changed its name to Invesco VIF Real Estate Opportunity Portfolio and Invesco Industrial Income changed its name to Invesco Equity Income on same said date. 6. NEW DIVISION On June 5, 2000, the Separate Account offered a new division, VABR. 25 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000 (UNAUDITED) Investment information, summarized by investment type and industry sector, for each portfolio in which the Separate Account invests is presented below: Metropolitan Series Fund, Inc.
State Street State Street State Street State Street Research Research Research Research Growth Income Money Market Diversified Portfolio Portfolio Portfolio Portfolio -------------- ------------ ------------ -------------- Value Value Value Value (Note 2A) (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Banks................... $ 178,383,221 5.4% $ 84,659,529 3.1% Biotechnology........... 38,812,528 1.2% 18,367,847 0.7% Broadcasting............ 17,340,816 0.5% 38,227,212 1.4% Business Services....... 58,736,250 1.8% 27,878,835 1.0% Communication Services.. 113,069,017 3.5% 21,994,513 0.8% Communications.......... 8,785,063 0.3% 3,945,250 0.1% Computer & Business Equipment.............. 332,848,184 10.2% 154,838,550 5.6% Conglomerates........... 231,603,719 7.1% 109,908,012 4.0% Containers & Glass...... 5 0.0% Domestic Oil............ 151,208,900 4.6% 71,586,520 2.6% Drugs & Health Care..... 479,669,780 14.6% 226,474,534 8.2% Electric Utilities...... 46,923,969 1.4% 22,269,131 0.8% Electronics............. 95,937,024 2.9% 54,434,459 2.0% Financial Services...... 122,013,975 3.7% 57,769,875 2.1% Food & Beverages........ 97,532,500 3.0% 46,246,769 1.7% Gas & Pipeline Utilities.............. 55,201,387 1.7% 26,178,938 1.0% Household Appliances & Home Furnishings....... 26,830,913 0.8% 12,052,463 0.4% Insurance............... 259,891,758 7.9% 123,301,839 4.5% International Oil....... 36,906,351 1.1% 17,397,390 0.6% Internet................ 23,479,560 0.7% 10,544,400 0.4% Leisure................. 45,015,175 1.4% 21,338,557 0.8% Petroleum Services...... 85,795,350 2.6% 39,648,375 1.4% Retail.................. 172,889,094 5.3% 81,800,237 3.0% Software................ 217,107,031 6.6% 101,970,198 3.7% Telephone............... 64,864,600 2.0% 30,726,512 1.1% Tobacco................. 59,624,400 1.8% 28,274,400 1.0% -------------- -------------- Total Common Stock...... 3,020,470,565 92.1% 1,431,834,350 52.0% -------------- -------------- LONG-TERM DEBT SECURITIES Corporate Bonds: Aerospace & Defense..... $ 2,725,256 0.6% 9,442,771 0.3% Automobiles............. 3,033,772 0.6% 3,235,410 0.1% Biotechnology........... 2,295,287 0.5% 6,416,930 0.2% Business Services....... 3,614,523 0.8% 8,846,359 0.3% Chemicals............... 502,945 0.1% 1,413,035 0.1% Collateralized Mortgage Obligations............ 23,867,535 5.0% 44,108,035 1.6% Communication Services.. 1,820,711 0.4% 5,088,015 0.2% Conglomerates........... 8,359,255 0.3% Corporate............... 6,616,751 0.2% Domestic Oil............ 1,457,500 0.3% 4,028,000 0.1% Drugs & Health Care..... 5,843,456 1.2% 16,147,312 0.6% Electric Utilities...... 30,005,788 6.3% 71,825,874 2.6% Electrical Equipment.... 5,374,789 0.2% Electronics............. 5,854,056 0.2% Finance & Banking....... 71,364,431 15.0% 169,565,907 6.2% Financial Services...... 25,593,458 5.4% 64,765,401 2.3% Food & Beverages........ 5,722,206 1.2% 24,621,964 0.9% Foreign Governments..... 15,411,874 0.6% Gas & Pipeline Utilities.............. 4,149,877 0.9% 10,881,376 0.4% Gas Exploration......... 2,329,785 0.5% 6,558,851 0.2% Hotels & Restaurants.... 3,222,090 0.7% 7,012,743 0.3% Household Products...... 2,451,998 0.5% 6,891,404 0.2% Industrial Machinery.... 10,003,876 0.4% Leisure................. 4,613,250 1.0% 13,389,000 0.5% Newspapers.............. 1,130,963 0.2% 3,019,845 0.1% Paper & Forest.......... 4,944,850 1.0% 13,522,173 0.5% Petroleum Services...... 2,158,288 0.5% 5,003,304 0.2%
26 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
State Street State Street State Street State Street Research Research Research Research Growth Income Money Market Diversified Portfolio Portfolio Portfolio Portfolio -------------- ------------ ------------ -------------- Value Value Value Value (Note 2A) (Note 2A) (Note 2A) (Note 2A) Pollution Control....... $ 1,880,000 0.4% $ 68,625 0.0% Retail.................. 11,154,694 2.4% 17,372,011 0.6% State Housing Authorities............ 5,410,080 1.1% 12,650,040 0.5% Telephone............... 11,192,154 2.4% 34,511,206 1.3% Utilities............... 2,813,453 0.6% 11,189,361 0.4% ------------ -------------- Total Corporate Bonds... 235,298,350 49.6% 623,195,553 22.6% ------------ -------------- Federal Agency Obligations............ 61,285,869 12.9% 131,108,933 4.8% Federal Treasury Obligations............ 99,148,992 20.9% 303,171,940 11.0% Foreign Obligations..... 8,179,133 1.7% 93,476 0.0% Yankee Bonds............ 25,262,556 5.3% 72,558,473 2.6% ------------ -------------- Total Bonds............. 193,876,550 40.8% 506,932,822 18.4% ------------ -------------- SHORT-TERM OBLIGATIONS Bank Notes.............. $ 3,676,683 7.6% Certificates of Deposit- Euro................... 6,448,025 13.3% Commercial Paper........ $ 287,499,835 8.8% 54,073,357 11.4% 38,044,503 78.8% 234,802,428 8.5% Repurchase Agreements... 452,000 0.0% -------------- ------------ ----------- -------------- Total Short-Term Obligations............ 287,499,835 8.8% 54,073,357 11.4% 48,169,211 99.7% 235,254,428 8.5% -------------- ------------ ----------- -------------- TOTAL INVESTMENTS....... 3,307,970,400 100.9% 483,248,257 101.8% 48,169,211 99.7% 2,797,217,153 101.5% Other Assets Less Liabilities............ (29,007,023) (0.9%) (8,350,224) (1.8%) 127,089 0.3% (40,295,318) (1.5%) -------------- ------------ ----------- -------------- NET ASSETS.............. $3,278,963,377 100.0% $474,898,033 100.0% $48,296,300 100.0% $2,756,921,835 100.0% ============== ============ =========== ==============
27 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
State Street Putnam Research MetLife International Aggressive Stock Index Stock Growth Portfolio Portfolio Portfolio -------------- ------------- -------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Advertising............. $ 5,632,298 1.3% Aerospace & Defense..... $ 53,268,907 1.3% 1,047,018 0.3% Air Travel.............. 10,780,594 0.3% 438,184 0.1% Aluminum................ 9,837,945 0.2% Apparel & Textiles...... 7,791,135 0.2% 7,640,951 1.8% $ 32,465,375 2.2% Auto Parts.............. 6,699,799 0.2% Automobiles............. 29,162,758 0.7% 7,375,092 1.7% Banks................... 320,974,292 8.0% 26,933,643 6.3% 17,881,500 1.2% Biotechnology........... 38,210,156 2.5% Building & Construction. 5,318,157 0.1% 3,945,340 0.9% 6,543,769 0.4% Business Services....... 68,574,974 1.7% 520,375 0.1% 58,007,559 3.9% Chemicals............... 64,675,688 1.6% 11,945,748 2.8% Communication Services.. 154,562,325 3.9% 71,386,539 16.7% 35,410,403 2.4% Communications.......... 7,474,242 1.7% Computer & Business Equipment.............. 431,245,676 10.8% 22,785,992 5.3% 259,349,478 17.3% Conglomerates........... 194,941,051 4.9% 2,942,651 0.7% Construction Materials.. 8,097,172 1.9% Containers & Glass...... 2,051,969 0.1% Cosmetics & Toiletries.. 16,769,257 0.4% 1,360,654 0.3% Domestic Oil............ 249,615,272 6.2% 51,627,191 12.1% 116,310,259 7.7% Drugs & Health Care..... 560,897,690 14.0% 50,524,690 11.8% 262,751,462 17.5% Electric Utilities...... 108,344,840 2.7% 9,096,478 2.1% Electrical Equipment.... 26,013,291 0.6% 32,227,200 2.1% Electronics............. 162,869,292 4.1% 3,533,240 0.8% 59,011,209 3.9% Financial Services...... 205,488,204 5.1% 40,609,065 9.5% Food & Beverages........ 151,087,883 3.8% 12,791,706 3.0% 12,938,344 0.9% Gas & Pipeline Utilities.............. 42,150,264 1.1% 7,349,678 1.7% Hotels & Restaurants.... 29,593,014 0.7% 16,893,297 1.1% Household Appliances & Home Furnishings....... 10,055,610 0.3% Household Products...... 54,125,451 1.4% Industrial Machinery.... 32,276,782 0.8% 7,241,153 1.7% 32,922,563 2.2% Insurance............... 170,586,846 4.3% 23,451,157 5.5% 120,992,997 8.1% International Oil....... 1,754,875 0.4% Internet................ 27,531,602 0.7% Leisure................. 33,679,388 0.8% 2,077,222 0.5% Mining.................. 7,073,891 0.2% 2,592,886 0.6% Non-Ferrous Metals...... 5,935,057 0.1% Paper & Forest.......... 31,776,020 0.8% 2,268,422 0.5% Petroleum Services...... 10,840,718 0.3% 42,872,813 2.8% Publishing.............. 9,424,076 0.2% 15,063,500 1.0% Railroads & Equipment... 11,695,189 0.3% 128,223 0.0% Real Estate............. 6,308,791 1.5% Retail.................. 240,243,233 6.0% 2,532,071 0.6% 44,677,844 3.0% Software................ 194,191,019 4.9% 7,279,121 1.7% 168,097,456 11.2% Steel................... 541,350 0.0% Technology.............. 971,963 0.0% Telephone............... 182,533,463 4.6% Tobacco................. 34,686,091 0.9% 5,100,157 1.2% Trucking & Freight Forwarding............. 3,860,456 0.1% 1,307,959 0.3% -------------- ------------ -------------- Total Common Stock...... 3,974,742,482 99.4% 417,099,984 97.4% 1,372,627,184 91.4% -------------- ------------ -------------- SHORT-TERM OBLIGATIONS Commercial Paper........ 15,108,314 3.5% 158,881,250 10.6% Discount Note........... 13,797,980 0.3% -------------- ------------ -------------- Total Short-Term Obligations............ 13,797,980 0.3% 15,108,314 3.5% 158,881,250 10.6% -------------- ------------ -------------- TOTAL INVESTMENTS....... 3,988,540,462 99.7% 432,208,298 100.9% 1,531,508,434 102.0% Other Assets Less Liabilities............ 11,363,013 0.3% (3,689,444) (0.9%) (30,436,296) (2.0%) -------------- ------------ -------------- NET ASSETS.............. $3,999,903,475 100.0% $428,518,854 100.0% $1,501,072,138 100.0% ============== ============ ==============
28 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
Loomis Sayles High Yield Bond Portfolio -------------- Value (Note 2A) COMMON STOCK Communication Services................................... $ 511,125 0.7% Domestic Oil............................................. 733,404 1.1% Foreign Corporate........................................ 159,244 0.2% Paper & Forest........................................... 659,419 1.0% Real Estate Investment Trust............................. 393,281 0.5% Transportation........................................... 176,633 0.3% ----------- Total Common Stock....................................... 2,633,106 3.8% ----------- PREFERRED STOCK Communication Services................................... 407,456 0.6% Corporate................................................ 642,000 0.9% Finance & Banking........................................ 1,320,887 1.9% Financial Service........................................ 6,625 0.0% Food & Beverages......................................... 4,594 0.0% Foreign Corporate........................................ 3,468 0.0% Gas & Pipeline........................................... 138,394 0.2% Mining................................................... 52,000 0.1% Real Estate Investment Trust............................. 1,035,356 1.5% Utilities-Electric....................................... 314,505 0.5% Utilities-Telephone...................................... 128,250 0.2% ----------- Total Preferred Stock.................................... 4,053,535 5.9% ----------- LONG-TERM DEBT SECURITIES Bonds & Notes Apparel & Textiles....................................... 273,000 0.4% Automotive............................................... 218,540 0.3% Banks.................................................... 588,000 0.8% Broadcasting............................................. 754,000 1.1% Chemicals................................................ 457,780 0.7% Communication Services................................... 296,700 0.4% Communications........................................... 2,100,400 3.0% Computer & Business Equipment............................ 197,000 0.3% Domestic Oil............................................. 2,695,860 3.9% Drugs & Health Care...................................... 896,627 1.3% Electric Utilities....................................... 2,839,166 4.1% Electrical Equipment..................................... 1,080,000 1.6% Finance & Banking........................................ 1,905,231 2.8% Food & Beverages......................................... 455,000 0.7% Foreign Corporate........................................ 2,076,832 3.0% Foreign Government....................................... 602,997 0.9% Gas & Pipeline Utilities................................. 647,000 0.9% Government Sponsored..................................... 935,250 1.4% Hotels & Restaurants..................................... 703,448 1.0% Household Appliance & Home Furnishings................... 63,600 0.1% Industrial Machinery..................................... 186,284 0.3% Industrials.............................................. 1,135,813 1.6% International Oil........................................ 738,000 1.1% Internet................................................. 330,375 0.5% Mining................................................... 723,201 1.0% Paper & Forest........................................... 360,000 0.5% Real Estate Investment Trust............................. 1,089,112 1.6% Retail................................................... 1,013,504 1.5% Semiconductors........................................... 118,623 0.2% Telephone................................................ 8,401,658 12.2% Transportation........................................... 851,648 1.2% Yankee................................................... 5,897,909 8.5% ----------- Total Bonds & Notes...................................... 40,632,558 58.9% -----------
29 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
Loomis Sayles High Yield Bond Portfolio -------------- Value (Note 2A) Convertible Bonds Aerospace & Defense..................................... $ 558,625 0.8% Automobiles............................................. 612,750 0.9% Banks................................................... 538,508 0.8% Biotechnology........................................... 802,687 1.2% Building & Construction................................. 88,000 0.1% Business Services....................................... 705,804 1.0% Computer & Business Equipment........................... 1,839,050 2.7% Construction Materials.................................. 388,500 0.6% Domestic Oil............................................ 903,992 1.3% Drugs & Health Care..................................... 2,027,997 2.9% Electronics............................................. 1,954,547 2.8% Finance & Banking....................................... 367,250 0.5% Food & Beverages........................................ 146,250 0.2% Foreign Corporate....................................... 2,112,742 3.1% Forest Products......................................... 248,500 0.4% Hotels & Restaurants.................................... 255,000 0.4% Industrial Machinery.................................... 938,575 1.4% International Oil....................................... 286,163 0.4% Internet................................................ 176,750 0.2% Mining.................................................. 128,127 0.2% Retail.................................................. 57,158 0.1% Semiconductors.......................................... 339,918 0.5% Telephone............................................... 679,012 1.0% Transportation.......................................... 198,750 0.3% Yankee.................................................. 1,965,900 2.8% ----------- Total Convertible Bonds................................. 18,320,555 26.6% ----------- Warrants Domestic Oil............................................ 122,188 0.2% Foreign Corporate....................................... 435 0.0% Transportation.......................................... 3,307 0.0% ----------- Total Warrants.......................................... 125,930 0.2% ----------- Short-Term Obligations Repurchase Agreements................................... 2,117,000 3.1% ----------- TOTAL INVESTMENTS....................................... 67,882,684 98.5% Other Assets Less Liabilities........................... 1,061,686 1.5% ----------- NET ASSETS.............................................. $68,944,370 100.0% ===========
30 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
T. Rowe Price Scudder Small Cap Global Equity Growth Janus Mid Cap Portfolio Portfolio Portfolio ------------- ------------- -------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense..... $ 4,200,645 2.0% $ 1,829,684 0.5% Air Travel.............. 2,181,928 0.6% Apparel & Textiles...... 5,846,906 1.7% Auto Parts.............. 216,450 0.1% Banks................... 3,090,239 1.5% 11,793,781 3.5% Biotechnology........... 9,972,987 3.0% Broadcasting............ 1,927,412 0.6% $ 48,936,398 2.7% Building & Construction. 4,081,201 1.2% Business Services....... 3,897,638 1.8% 21,866,604 6.5% 170,336,512 9.6% Chemicals............... 18,036,759 8.5% 4,343,889 1.3% Communication Services.. 24,942,895 11.8% 13,340,138 4.0% 206,188,576 11.6% Communications.......... 11,676,986 3.5% 26,693,840 1.5% Computer & Business Equipment.............. 10,275,194 4.9% 47,207,574 14.0% 358,247,740 20.1% Conglomerates........... 3,031,841 1.4% 863,519 0.3% Construction Materials.. 579,656 0.2% 47,229,566 2.6% Domestic Oil............ 22,574,142 10.7% 10,518,619 3.1% 164,069,201 9.2% Drugs & Health Care..... 16,704,314 7.9% 55,510,028 16.5% 389,437,044 21.8% Electric Utilities...... 14,569,261 6.9% 1,140,081 0.3% Electrical Equipment.... 10,593,697 3.1% 26,236,478 1.5% Electronics............. 1,354,444 0.6% 17,762,303 5.3% 131,447,150 7.4% Financial Services...... 2,256,176 1.1% 11,206,529 3.3% 16,564,238 0.9% Food & Beverages........ 3,061,966 1.5% 1,985,551 0.6% Gas & Pipeline Utilities.............. 4,528,258 2.1% Hotels & Restaurants.... 4,881,720 1.4% Household Appliances & Home Furnishings....... 1,791,025 0.8% 2,277,625 0.7% Industrial Machinery.... 494,213 0.2% 4,617,194 1.4% Insurance............... 15,160,913 7.2% 5,561,905 1.6% Internet................ 842,160 0.4% Leisure................. 2,139,819 0.6% Mining.................. 17,802,425 8.4% 389,565 0.1% Miscellaneous........... 85,786 0.0% Non-Ferrous Metals...... 2,109,744 1.0% Paper & Forest.......... 548,206 0.3% Petroleum Services...... 867,825 0.3% Radio................... 1,683,369 0.5% 44,624,834 2.5% Railroads & Equipment... 3,707,854 1.8% 2,473,444 0.7% Real Estate............. 3,397,965 1.6% 1,975,869 0.6% Real Estate Investment Trust.................. 4,118,494 1.9% 646,840 0.2% Retail.................. 4,422,932 2.1% Retail Trade............ 14,613,620 4.3% Software................ 2,286,581 1.1% 41,816,210 2.3% Steel................... 884,250 0.4% Telecommunications Equipment & Services... 43,475,347 12.9% Telephone............... 1,881,824 0.9% 4,443,522 1.3% 8,631,327 0.5% Trucking & Freight Forwarding............. 1,115,379 0.5% ------------ ------------ -------------- Total Common Stock...... 193,087,737 91.3% 336,578,973 99.8% 1,680,459,114 94.2% ------------ ------------ -------------- LONG-TERM DEBT SECURITIES Participating Loan Notes.................. 354,942 0.2% ------------ Total Long-Term Debt Securities............. 354,942 0.2% ------------ SHORT-TERM OBLIGATIONS Commercial Paper........ 80,385,483 4.5% Discount Note........... 14,938,667 0.9% Repurchase Agreements... 7,869,000 3.7% 115,000 0.0% Regulated Investment Companies.............. 18,093,343 6.5% ------------ ------------ -------------- Total Short-Term Obligations............ 7,869,000 3.7% 18,093,343 6.5% 95,439,150 5.4% ------------ ------------ -------------- TOTAL INVESTMENTS....... 201,311,679 95.2% 354,672,316 106.3% 1,775,898,264 99.6% Other Assets Less Liabilities............ 10,042,133 4.8% (17,329,559) (6.3%) 7,480,476 0.4% ------------ ------------ -------------- NET ASSETS.............. $211,353,812 100.0% $337,342,757 100.0% $1,783,378,740 100.0% ============ ============ ==============
31 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
Morgan Stanley Russell Harris Oakmark EAFE Index 2000 Index Large Cap Value Portfolio Portfolio Portfolio -------------- ------------ --------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Advertising............. $ 219,259 0.2% Aerospace & Defense..... 362,238 0.4% $ 1,471,459 1.2% $ 2,699,100 5.0% Air Travel.............. 608,639 0.6% 629,514 0.5% Apparel & Textiles...... 845,424 0.8% 1,151,820 0.9% 1,126,563 2.1% Auto Parts.............. 636,212 0.6% 1,335,674 1.1% Automobiles............. 3,052,007 3.0% 108,382 0.1% 1,237,988 2.3% Banks................... 14,193,161 14.1% 10,066,105 8.0% 2,822,125 5.3% Biotechnology........... 2,786,485 2.2% Broadcasting............ 817,826 0.6% Building & Construction. 991,817 1.0% 626,500 0.5% 1,310,062 2.4% Business Services....... 1,150,142 1.1% 5,227,294 4.2% 7,256,681 13.5% Chemicals............... 2,297,369 2.3% 2,859,945 2.3% Communication Services.. 13,573,909 13.4% 3,067,078 2.4% 2,610,312 4.9% Communications.......... 1,111,479 1.1% 1,989,190 1.6% Computer & Business Equipment.............. 7,452,359 7.4% 5,898,985 4.7% 1,118,375 2.1% Conglomerates........... 2,415,251 2.4% 99,305 0.1% Construction Materials.. 541,340 0.5% 477,248 0.4% Containers & Glass...... 197,132 0.2% 641,932 0.5% Cosmetics & Toiletries.. 818,072 0.8% 189,209 0.1% Domestic Oil............ 4,442,092 4.4% 3,675,834 2.9% Drugs & Health Care..... 9,365,710 9.3% 14,511,358 11.5% 1,241,500 2.3% Electric Utilities...... 2,914,144 2.9% 3,052,118 2.4% 1,285,063 2.4% Electrical Equipment.... 985,430 1.0% 2,760,925 2.2% 4,131,375 7.7% Electronics............. 1,676,139 1.7% 3,682,479 2.9% Financial Services...... 3,789,423 3.7% 3,346,749 2.7% 911,906 1.7% Food & Beverages........ 4,326,637 4.3% 2,714,155 2.2% 1,963,500 3.7% Gas & Pipeline Utilities.............. 1,408,162 1.4% 3,032,715 2.4% Hotels & Restaurants.... 713,609 0.7% 2,293,187 1.8% 1,364,250 2.5% Household Appliances & Home Furnishings....... 1,420,891 1.4% 3,407,803 2.7% 5,344,125 10.0% Household Products...... 263,313 0.3% 781,054 0.6% 1,126,125 2.1% Industrial Machinery.... 1,706,807 1.7% 4,126,032 3.3% 966,813 1.8% Industrials............. 114,966 0.1% Insurance............... 6,367,803 6.3% 3,619,247 2.9% 876,688 1.6% Insurance Contracts..... 8,464 0.0% Internet................ 6,914 0.0% Leisure................. 629,572 0.6% 902,381 0.7% 4,429,869 8.3% Mining.................. 1,214,053 1.2% 1,623,460 1.3% Miscellaneous........... 61,141 0.0% Mutual Funds............ 3,487,311 2.8% Paper & Forest.......... 368,990 0.4% 604,862 0.5% Petroleum Services...... 1,488,902 1.5% Publishing.............. 78,095 0.1% Railroads & Equipment... 790,095 0.8% 793,665 0.6% Real Estate............. 1,272,610 1.3% 1,247,002 1.0% Real Estate Investment Trust.................. 7,136,661 5.7% Retail.................. 2,615,275 2.6% 4,558,409 3.6% 5,011,812 9.4% Shipbuilding............ 437,831 0.4% 199,823 0.2% Software................ 1,463,136 1.4% 7,810,792 6.2% 848,250 1.6% Technology.............. 1,024 0.0% Telephone............... 2,591,187 4.8% Tobacco................. 465,337 0.5% 219,215 0.2% Transportation.......... 182,513 0.2% Trucking & Freight Forwarding............. 253,982 0.2% 551,665 0.4% Utilities............... 123,891 0.1% ------------ ------------ ----------- Total Common Stock ..... 101,151,696 100.2% 119,853,918 95.3% 52,273,669 97.5% ------------ ------------ -----------
32 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
Morgan Stanley Russell Harris Oakmark EAFE Index 2000 Index Large Cap Value Portfolio Portfolio Portfolio -------------- ------------ --------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) PREFERRED STOCK Communication Services.. $ 177,259 0.2% Retail.................. 28,645 0.0% ------------ Total Preferred Stock... 205,904 0.2% ------------ Total Equity Securities. 101,357,600 100.4% ------------ SHORT-TERM OBLIGATIONS Discount Notes.......... 2,274,667 2.3% Federal Agency Obligations............ $ 6,324,074 5.0% Repurchase Agreements... $ 3,842,000 7.2% ------------ ------------ ----------- Total Short-Term Obligations............ 2,274,667 2.3% 6,324,074 5.0% 3,842,000 7.2% ------------ ------------ ----------- TOTAL INVESTMENTS....... 103,632,267 102.7% 126,177,992 100.3% 56,115,669 104.7% Other Assets Less Liabilities............ (2,682,027) (2.7%) (440,052) (0.3%) (2,540,732) (4.7%) ------------ ------------ ----------- NET ASSETS.............. $100,950,240 100.0% $125,737,940 100.0% $53,574,937 100.0% ============ ============ ===========
33 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
State Street Neuberger Berman T. Rowe Price Research Aurora Partners Mid Cap Large Cap Growth Small Cap Value Portfolio Portfolio Portfolio ---------------- ---------------- --------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense..... $ 2,343,900 1.8% $ 841,288 0.5% $ 2,028,094 3.7% Air Travel.............. 2,443,473 1.9% 751,094 1.4% Apparel & Textiles...... 46,094 0.1% Auto Parts.............. 1,821,238 1.4% 3,659,597 6.7% Automobiles............. 665,681 1.2% Banks................... 7,849,109 6.0% 12,070,044 6.7% 861,467 1.6% Biotechnology........... 251,738 0.2% Broadcasting............ 413,475 0.2% Building & Construction. 1,148,875 0.9% 769,750 1.4% Business Services....... 8,390,425 6.4% 6,772,563 3.8% 1,081,506 2.0% Chemicals............... 5,257,331 4.0% 2,582,541 4.7% Communication Services.. 4,862,412 3.7% 8,938,811 5.0% 1,309,856 2.4% Communications.......... 1,081,175 0.8% 1,044,366 0.6% 910,356 1.7% Computer & Business Equipment.............. 3,936,359 3.0% 16,327,297 9.1% 649,209 1.2% Conglomerates........... 684,375 0.5% 5,336,244 3.0% 93,588 0.2% Containers & Glass...... 161,250 0.3% Cosmetics & Toiletries.. 1,091,363 0.8% 419,050 0.2% Domestic Oil............ 10,444,209 7.9% 6,102,146 3.4% 5,923,961 10.9% Drugs & Health Care..... 8,554,004 6.5% 24,698,030 13.7% 1,774,203 3.3% Electric Utilities...... 8,906,232 6.8% Electrical Equipment.... 3,726,500 2.8% 1,075,250 2.0% Electronics............. 2,347,744 1.8% 14,775,913 8.2% 349,813 0.6% Finance & Banking....... 1,818,094 1.4% 236,500 0.4% Financial Services...... 7,272,425 5.5% 17,556,726 9.7% 725,537 1.3% Food & Beverages........ 1,788,563 1.4% 3,341,406 1.8% 563,038 1.0% Foreign Corporate....... 8,693,053 4.8% Gas & Pipeline Utilities.............. 1,867,700 1.4% 802,200 0.4% 696,750 1.3% Hotels & Restaurants.... 912,975 0.5% 7,810,862 14.4% Household Appliances & Home Furnishings....... 1,649,375 1.3% 315,938 0.6% Industrial Machinery.... 1,928,381 1.5% 1,599,975 0.9% 1,328,872 2.4% Insurance............... 10,486,369 8.0% 6,152,381 3.4% 2,514,259 4.6% Internet................ 1,767,840 1.0% Leisure................. 687,119 0.5% 659,775 0.4% 1,556,737 2.9% Mining.................. 143,750 0.3% Paper & Forest.......... 1,821,963 1.4% Petroleum Services...... 3,000,356 1.7% Radio................... 286,544 0.5% Railroads & Equipment... 3,616,087 2.8% 1,333,469 2.5% Real Estate............. 985,300 0.7% Real Estate Investment Trust.................. 2,480,587 1.9% Retail.................. 3,403,037 2.6% 13,128,539 7.3% 2,224,062 4.1% Shipbuilding............ 386,250 0.7% Software................ 4,271,841 3.2% 10,294,670 5.7% 2,378,111 4.4% Telephone............... 2,573,875 1.4% Tobacco................. 2,719,200 1.5% ------------ ------------ ----------- Total Common Stock...... 119,217,303 90.8% 170,942,198 94.9% 47,193,989 86.8% ------------ ------------ ----------- SHORT-TERM OBLIGATIONS Commercial Paper........ 7,874,047 14.5% Money Market Fund....... 8,162,371 4.5% Repurchase Agreements... 16,725,000 12.7% 2,656,000 1.5% ------------ ------------ ----------- Total Short-Term Obligations............ 16,725,000 12.7% 10,818,371 6.0% 7,874,047 14.5% ------------ ------------ ----------- TOTAL INVESTMENTS....... 135,942,303 103.5% 181,760,569 100.9% 55,068,036 101.3% Other Assets Less Liabilities............ (4,586,128) (3.5%) (1,688,522) (0.9%) (689,311) (1.3%) ------------ ------------ ----------- NET ASSETS.............. $131,356,175 100.0% $180,072,047 100.0% $54,378,725 100.0% ============ ============ ===========
34 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
MetLife Mid Cap Putnam Stock Index Large Cap Portfolio Portfolio --------------- ----------- Value Value (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense ............. $ 530,537 0.9% Air Travel....................... 55,989 0.1% Apparel & Textiles............... 291,962 0.5% Auto Parts....................... 438,440 0.7% Banks............................ 5,184,211 8.4% $ 695,362 1.9% Biotechnology ................... 894,960 1.4% Broadcasting .................... 185,589 0.3% Building & Construction.......... 369,077 0.6% Business Services................ 4,699,956 7.6% Chemicals........................ 1,271,481 2.1% Communication Services........... 3,196,749 5.2% 2,233,643 6.0% Communications .................. 2,129,012 3.4% 243,759 0.7% Computer & Business Equipment.... 4,040,824 6.5% 6,970,584 18.9% Conglomerates.................... 4,601,544 12.5% Construction Materials........... 399,797 0.6% Containers & Glass .............. 188,378 0.3% Cosmetics & Toiletries........... 143,134 0.2% Domestic Oil .................... 1,108,924 1.8% Drugs & Health Care ............. 7,339,684 11.9% 8,970,497 24.3% Electric Utilities............... 3,115,676 5.0% Electrical Equipment............. 1,324,504 2.1% Electronics...................... 2,230,099 3.6% 2,266,272 6.1% Finance & Banking................ 216,072 0.3% Financial Services .............. 1,884,501 3.0% 1,492,181 4.0% Food & Beverages ................ 1,477,409 2.4% 317,200 0.9% Gas & Pipeline Utilities ........ 1,772,015 2.9% Hotels & Restaurants............. 1,245,577 2.0% Household Appliances & Home Furnishings .................... 748,561 1.2% Household Products .............. 254,694 0.4% Industrial Machinery............. 763,152 1.2% Insurance........................ 1,984,404 3.2% 931,416 2.5% Internet ........................ 396,720 1.1% Leisure.......................... 182,434 0.3% Mining........................... 155,865 0.3% Paper & Forest................... 489,861 0.8% Petroleum Services .............. 1,110,377 1.8% Publishing....................... 269,454 0.4% Railroads & Equipment............ 542,996 0.9% Real Estate ..................... 64,406 0.1% Retail .......................... 1,848,085 3.0% 409,063 1.1% Shipbuilding..................... 124,640 0.2% Software......................... 4,729,688 7.6% 4,887,010 13.2% Telephone ....................... 707,775 1.9% Tobacco.......................... 396,061 0.6% Trucking & Freight Forwarding.... 484,191 0.8% Unit Investment Trust............ 593,524 1.0% ----------- ----------- Total Common Stock............... 60,476,950 97.6% 35,123,026 95.1% ----------- ----------- SHORT-TERM OBLIGATIONS Commercial Paper ................ 2,486,558 6.7% Discount Note.................... 1,299,810 2.1% ----------- ----------- Total Short-Term Obligations..... 1,299,810 2.1% 2,486,558 6.7% ----------- ----------- TOTAL INVESTMENTS................ 61,776,760 99.7% 37,609,584 101.8% Other Assets Less Liabilities.... 157,248 0.3% (677,836) (1.8%) ----------- ----------- NET ASSETS....................... $61,934,008 100.0% $36,931,748 100.0% =========== ===========
35 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Metropolitan Series Fund, Inc.
Lehman Brothers Aggregate Bond Index Portfolio ------------ Value (Note 2A) LONG-TERM DEBT SECURITIES Bonds & Notes: Aerospace & Defense..................................... $ 231,607 0.2% Air Travel.............................................. 799,129 0.5% Auto Parts.............................................. 255,675 0.2% Automobiles............................................. 1,371,852 0.9% Banks................................................... 503,870 0.3% Collateralized Mortgage Obligations..................... 657,778 0.5% Communication Services.................................. 757,065 0.5% Computer & Business Equipment........................... 480,033 0.3% Cosmetics & Toiletries.................................. 410,776 0.3% Drugs & Health Care..................................... 144,145 0.1% Electric Utilities...................................... 1,865,384 1.3% Federal Agencies........................................ 69,383,291 47.6% Finance & Banking....................................... 16,282,127 11.2% Financial Services...................................... 1,368,549 0.9% Food & Beverages........................................ 200,126 0.1% Government Sponsored.................................... 626,786 0.4% Industrials............................................. 1,101,683 0.8% Leisure................................................. 467,370 0.3% Petroleum Services...................................... 756,851 0.5% Railroads & Equipment................................... 312,330 0.2% Retail.................................................. 3,117,520 2.1% Steel................................................... 220,872 0.2% Telephone............................................... 1,857,084 1.3% Transportation.......................................... 300,211 0.2% U.S. Treasury Obligations............................... 37,727,730 25.9% Yankee Bonds............................................ 5,263,959 3.6% ------------ Total Bonds & Notes..................................... 146,463,803 100.4% ------------ SHORT-TERM OBLIGATIONS Discount Notes.......................................... 2,886,014 2.0% ------------ Total Short-Term Obligations............................ 2,886,014 2.0% ------------ TOTAL INVESTMENTS....................................... 149,349,817 102.4% Other Assets Less Liabilities........................... (3,512,601) (2.4%) ------------ NET ASSETS.............................................. $145,837,216 100.0% ============
36 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Janus Aspen Series Fund
Janus Aspen Growth Portfolio -------------- Value (Note 2A) COMMON STOCK Aerospace & Defense................................... $ 181,463,718 5.0% Airlines.............................................. 3,831,022 0.1% Broadcast Services & Programming...................... 97,551,309 2.7% Business to Business/E-Commerce....................... 20,929,590 0.6% Cable Television...................................... 174,454,964 4.8% Casino Hotels......................................... 17,886,696 0.5% Cellular Telecommunications........................... 35,466,892 1.0% Commercial Banks...................................... 13,169,560 0.4% Commercial Services................................... 25,226,504 0.7% Computer Graphics..................................... 6,188,444 0.2% Computers............................................. 30,346,760 0.8% Computer Memory Devices............................... 112,819,630 3.1% Cosmetics & Toiletries................................ 170,956,562 4.7% Data Processing & Management.......................... 26,165,473 0.7% Diversified Operations................................ 139,776,087 3.8% E-Commerce/Services................................... 8,740,611 0.2% Electric-Generations.................................. 13,327,655 0.3% Electronic Components................................. 158,156,114 4.3% Enterprise Software & Services........................ 21,304,541 0.6% Finance-Credit Card................................... 45,928,244 1.3% Finance-Investment Bankers/Brokers.................... 141,313,781 3.9% Food-Retail........................................... 24,342,989 0.7% Hotels & Motels....................................... 19,258,485 0.5% Identification Systems & Devices...................... 27,437,328 0.7% Instruments-Scientific................................ 36,963,749 1.0% Insurance Brokers..................................... 2,796,855 0.1% Internet Brokers...................................... 93,473,663 2.6% Internet Infrastructure Software...................... 17,154,021 0.5% Internet Security..................................... 38,594,044 1.1% Life & Health Insurance............................... 24,320,269 0.7% Medical-Biomedical & Genetic.......................... 30,572,362 0.8% Medical-Drugs......................................... 21,036,778 0.6% Medical-Products...................................... 16,589,184 0.5% Money Center Banks.................................... 99,055,271 2.7% Multimedia............................................ 344,111,123 9.5% Networking Products................................... 99,728,422 2.7% Oil Companies......................................... 18,912,108 0.5% Pipelines............................................. 130,604,421 3.6% Radio................................................. 44,251,204 1.2% Retail-Apparel & Shoe................................. 20,883,174 0.6% Retail-Discount....................................... 45,819,646 1.3% Semiconductor Components/Integrated Circuits.......... 263,639,896 7.3% Semiconductor Equipment............................... 32,951,165 0.9% Super Regional Banks.................................. 15,356,751 0.4% Telecommunication Equipment........................... 217,698,074 6.0% Telecommunication Services............................ 93,698,483 2.6% Telephone-Integrated.................................. 77,543,782 2.1% Television............................................ 44,584,049 1.2% Transportation Services............................... 23,715,847 0.7% Web Hosting/Design.................................... 14,843,740 0.4% Web Portals/Internet Service Provider................. 12,416,988 0.3% Wireless Equipment.................................... 3,151,010 0.1% -------------- Total Common Stock.................................... 3,400,509,038 93.6% -------------- CORPORATE BONDS Telecommunication Services............................ 1,009,800 0.0% Web Hosting/Design.................................... 1,569,100 0.0% -------------- Total Corporate Bonds................................. 2,578,900 0.0% -------------- PREFERRED STOCKS Telecommunications Services........................... 1,301,945 0.0% Repurchase Agreements................................. 187,300,000 5.2% U.S. Government Agencies.............................. 49,511,229 1.4% -------------- TOTAL INVESTMENTS..................................... 3,641,201,112 100.2% Other Assets Less Liabilities......................... (6,737,696) (0.2%) -------------- NET ASSETS............................................ $3,634,463,416 100.0% ==============
37 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Invesco Variable Investment Fund, Inc.
Invesco Invesco Invesco VIF Equity VIF Real Estate VIF High Income Opportunity Yield Portfolio Portfolio Portfolio ------------ --------------- ----------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK & WARRANTS Aerospace & Defense..... $ 1,909,000 1.5% Agricultural Products... 592,669 0.5% Air Freight............. 1,364,475 1.1% $ 48,300 2.1% Aluminum................ 938,000 0.7% Automobiles............. 1,717,382 1.4% Banks................... 9,904,831 7.8% Beverages............... 2,356,900 1.8% Biotechnology........... 1,044,062 0.8% Broadcasting............ 3,877,650 3.0% $ 8,750 0.0% Cable................... 835,450 0.7% Chemicals............... 666,575 0.5% Communications-Equipment Manufacturing.......... 1,167,000 0.9% Computer Related........ 3,115,838 2.5% 8,100 0.0% Containers-Paper........ 638,138 0.5% Electric Utilities...... 1,377,816 1.1% Electrical Equipment.... 2,128,425 1.7% Electronics- Semiconductor.......... 2,493,437 2.0% Entertainment........... 1,068,360 0.8% 37,881 1.5% Financial............... 2,377,776 1.9% Foods................... 6,034,272 4.8% Gaming.................. 1,647,363 1.3% 54,900 2.2% Health Care Drugs- Pharmaceuticals........ 8,976,587 7.1% Insurance............... 8,392,425 6.6% 33,719 1.4% Investment Bank/Broker Firm................... 1,347,250 1.0% Investment Companies.... 3,155,000 2.5% 408,375 0.8% Lodging-Hotels.......... 76,800 3.1% Manufacturing........... 3,927,719 3.1% Metals Mining........... 535,800 0.4% Oil & Gas Related....... 13,252,563 10.5% Paper & Forest Products. 1,127,500 0.9% 50,737 2.1% Personal Care........... 2,167,500 1.7% Publishing.............. 1,172,500 0.9% Railroads............... 1,103,756 0.9% Real Estate Investment Trust.................. 1,699,825 69.2% Real Estate Related..... 22,688 0.9% Retail.................. 4,802,238 3.8% Retail Computers & Electronics............ 42,813 1.7% Retail General Merchandising.......... 53,125 2.2% Savings & Loan.......... 1,926,684 1.5% Services................ 1,160,250 0.9% Telecommunications- Cellular & Wireless.... 730,687 0.6% 143,406 5.8% Telecommunications-Long Distance............... 1,988,507 1.6% 44,000 1.8% 2,362 0.0% Telephone............... 4,791,968 3.8% ------------ ---------- ----------- Total Common Stock...... 107,814,353 85.1% 2,308,194 94.0% 427,587 0.8% ------------ ---------- ----------- PREFERRED STOCK Broadcasting............ 67,800 0.1% Computer Related........ 5,000 0.0% Publishing.............. 262,062 0.5% Telecommunications- Cellular & Wireless.... 1,522,350 3.0% Telecommunications-Long Distance............... 1,689,750 3.3% Telephone............... 840,200 1.6% ----------- Total Preferred Stock... 4,387,162 8.5% ------------ ---------- ----------- Total Equity Securities. 107,814,353 85.1% 2,308,194 94.0% 4,814,749 9.3% ------------ ---------- -----------
38 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Invesco Variable Investment Fund, Inc.
Invesco Invesco Invesco VIF Equity VIF Real Estate VIF High Income Opportunity Yield Portfolio Portfolio Portfolio ------------ --------------- ----------- Value Value Value (Note 2A) (Note 2A) (Note 2A) FIXED INCOME SECURITIES Corporate Bonds Broadcasting............ $ 351,750 0.3% $ 3,888,806 7.6% Cable................... 323,375 0.2% 2,435,313 4.7% Chemicals............... 762,000 1.5% Communications-Equipment & Manufacturing........ 215,625 0.2% 2,456,250 4.8% Computer Related........ 519,375 0.4% 459,000 0.9% Electric Utilities...... 4,435,248 3.5% 1,582,427 3.1% Electrical Equipment.... 204,000 0.4% Engineering & Construction........... 173,000 0.3% Financial Diversified... 650,000 1.3% Healthcare Services..... 254,435 0.2% 350,000 0.7% Insurance............... 434,056 0.3% Iron & Steel............ 331,100 0.6% Lodging-Hotels.......... 238,694 0.2% Metals & Mining......... 139,000 0.3% Oil & Gas Related....... 715,100 0.6% 941,875 1.8% Paper & Forest Products. 105,981 0.1% 1,117,500 2.2% Services................ 1,610,000 3.1% Shipping................ 50,000 0.1% Specialized Services.... 237,500 0.5% Specialty Printing...... 91,000 0.1% 819,000 1.6% Telecommunications- Cellular & Wireless.... 423,250 0.3% 4,320,000 8.4% Telecommunications-Long Distance............... 852,616 0.7% 7,705,102 15.0% Telephone............... 1,267,616 1.0% 10,441,493 20.3% ------------ ----------- Total Corporate Bonds... 10,228,121 8.1% 40,673,366 79.2% US Government Obligations............ 3,303,619 2.6% ------------ ----------- Total Fixed Income Securities............. 13,531,740 10.7% 40,673,366 79.2% ------------ ----------- SHORT TERM INVESTMENTS Repurchase Agreements... 5,415,000 4.3% ------------ Total Short Term Investments............ 5,415,000 4.3% 4,672,000 9.1% ------------ ----------- Total Other Securities.. 405,025 0.8% ------------ ----------- TOTAL INVESTMENTS....... 126,761,093 100.1% $2,308,194 94.0% 50,565,140 98.4% Other Assets Less Liabilities............ (78,489) (0.1%) 147,533 6.0% 835,959 1.6% ------------ ---------- ----------- NET ASSETS.............. $126,682,604 100.0% $2,455,727 100.0% $51,401,099 100.0% ============ ========== ===========
39 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Templeton Variable Products Series Fund
Templeton International Stock Portfolio ------------- Value (Note 2A) COMMON STOCK Aerospace & Defense.................................... $ 19,279,381 2.0% Airfreight & Couriers.................................. 10,123,073 1.1% Airlines............................................... 8,725,188 0.9% Auto Components........................................ 6,173,963 0.6% Automotive............................................. 9,652,942 1.0% Banks.................................................. 83,941,067 8.7% Beverages.............................................. 2,397,617 0.3% Building Products...................................... 8,966,774 0.9% Chemicals.............................................. 54,214,039 5.6% Commercial Services & Supplies......................... 9,237,174 1.0% Communications Equipment............................... 8,710,495 0.9% Computers & Peripherals................................ 6,934,644 0.7% Construction & Engineering............................. 3,176,494 0.3% Diversified Financials................................. 39,938,078 4.1% Diversified Telecommunications Services................ 57,472,882 6.0% Electric Utilities..................................... 79,909,838 8.3% Electrical Equipment................................... 13,646,959 1.4% Electronic Equipment & Instruments..................... 9,610,089 1.0% Food & Drug Retailing.................................. 12,930,648 1.3% Food Products.......................................... 29,079,912 3.0% Forest Products & Paper................................ 13,923,942 1.4% Health & Personal Care................................. 7,496,965 0.8% Hotels Restaurants & Leisure........................... 3,333,186 0.4% Household Durables..................................... 23,981,542 2.5% Insurance.............................................. 96,707,817 10.0% Machinery.............................................. 27,233,151 2.8% Marine................................................. 6,494,609 0.7% Media.................................................. 16,366,201 1.7% Metals & Mining........................................ 32,237,699 3.4% Multiline Retail....................................... 16,744,228 1.7% Oil & Gas.............................................. 51,747,874 5.4% Pharmaceuticals........................................ 60,928,892 6.3% Real Estate............................................ 23,123,586 2.4% Road & Rail............................................ 23,927,432 2.5% Semiconductor Equipment & Products..................... 3,463,409 0.4% Transportation Infrastructure.......................... 976,453 0.1% Wireless Telecommunication Services.................... 6,431,503 0.7% ------------ Total Common Stock..................................... 889,239,746 92.3% ------------ PREFERRED STOCKS....................................... 30,011,908 3.1% SHORT TERM INVESTMENTS................................. 4,999,230 0.5% ------------ Total Investments before Repurchase Agreements......... 924,250,884 95.9% Repurchase Agreements.................................. 51,761,000 5.4% ------------ TOTAL INVESTMENTS...................................... 976,011,884 101.3% Other Assets Less Liabilities.......................... (12,401,366) (1.3%) ------------ NET ASSETS............................................. $963,610,518 100.0% ============
40 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) New England Zenith Fund
Zenith Zenith Loomis Davis Sayles Small Venture Cap Series Value Series ------------ ------------ Value Value (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense................ $ 7,701,600 1.6% Apparel & Textiles................. 6,329,184 1.3% Auto Parts......................... 26,250 0.0% Banks.............................. 19,616,468 4.0% $101,163,078 10.9% Building & Construction............ 2,326,188 0.5% 23,686,444 2.6% Business Services.................. 19,920,947 4.1% 6,430,556 0.7% Chemicals.......................... 15,948,937 3.3% 18,221,225 2.0% Communication Services............. 26,094,741 5.4% 9,427,950 1.0% Communications..................... 17,901,071 3.7% Computer & Business Equipment...... 25,723,641 5.3% 123,153,656 13.3% Conglomerates...................... 45,443,400 4.9% Construction Materials............. 3,614,019 0.7% 6,036,210 0.7% Containers & Glass................. 13,237,000 1.4% Cosmetics & Toiletries............. 2,423,988 0.3% Domestic Oil....................... 4,976,597 1.0% 10,626,626 1.1% Drugs & Health Care................ 74,706,643 15.4% 88,163,699 9.5% Electrical Equipment............... 19,083,130 3.9% 4,364,121 0.5% Electric Utilities................. 9,853,131 2.0% Electronics........................ 15,919,295 3.3% 16,530,396 1.8% Financial Services................. 20,090,623 4.1% 150,566,563 16.3% Food & Beverages................... 11,635,769 2.4% Gas & Pipeline Utilities........... 12,932,825 2.7% Hotels & Restaurants............... 9,635,240 2.0% 29,476,400 3.2% Household Appliances & Home Furnishings....................... 14,723,004 3.0% Industrial Machinery............... 10,942,269 2.2% 7,435,106 0.8% Insurance.......................... 21,040,656 4.3% 86,384,950 9.3% Mining............................. 967,500 0.2% Paper & Forest..................... 1,943,525 0.4% Publishing......................... 1,367,080 0.3% 1,800,675 0.2% Railroads & Equipment.............. 4,924,588 1.0% Real Estate Investment Trust....... 14,145,688 2.9% 4,057,794 0.4% Retail............................. 19,651,362 4.0% 25,376,287 2.7% Software........................... 46,125,981 9.5% 4,380,984 0.5% Telephone.......................... 6,890,236 0.7% Tobacco............................ 25,454,000 2.8% Trucking & Freight Forwarding...... 11,874,244 1.3% ------------ ------------ Total Common Stock................. 459,867,952 94.5% 822,605,588 88.9% ------------ ------------ PREFERRED STOCKS Real Estate Investment Trust....... 3,557,231 0.4% ------------ Total Preferred Stocks............. 3,557,231 0.4% ------------ SHORT-TERM OBLIGATIONS Commercial Paper................... 28,237,453 5.8% Repurchase Agreements.............. 97,904,000 10.6% ------------ ------------ Total Short-Term Obligations....... 28,237,453 5.8% 97,904,000 10.6% ------------ ------------ TOTAL INVESTMENTS.................. 488,105,405 100.3% 924,066,819 99.9% Other Assets Less Liabilities...... (1,666,868) (0.3%) 1,198,297 0.1% ------------ ------------ NET ASSETS......................... $486,438,537 100.0% $925,265,116 100.0% ============ ============
41 NOTES TO FINANCIAL STATEMENTS--(Continued) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Continued) Alliance Variable Product Series Fund
Alliance Series Growth & Income-- Class B Portfolio ----------------- Value (Note 2A) COMMON STOCK Airlines............................................. $ 11,615,625 1.5% Banking.............................................. 92,422,012 12.3% Beverages............................................ 17,971,875 2.4% Broadcast Services and Programming................... 40,049,225 5.3% Capital Goods........................................ 24,373,750 3.3% Chemicals............................................ 26,004,063 3.5% Computers............................................ 37,266,750 5.0% Consumer Manufacturing............................... 8,671,875 1.2% Contract Manufacturing............................... 22,923,750 3.1% Cosmetics and Toiletries............................. 11,968,750 1.6% Drugs & Medical Products............................. 57,027,087 7.6% Electrical & Electronics............................. 7,159,375 1.0% Energy Sources....................................... 81,852,812 10.9% Financial Services................................... 69,438,773 9.3% Food & Household Products............................ 32,819,875 4.4% Insurance Brokers.................................... 9,362,813 1.3% Leisure.............................................. 15,625,937 2.1% Metals & Mining...................................... 5,862,500 0.8% Multi-Industry Companies............................. 29,350,000 3.9% Printing & Publishing................................ 11,035,938 1.5% Retail-Apparel and Shoe.............................. 11,793,750 1.6% Semiconductor Capital................................ 4,773,437 0.6% Semiconductor Components/Integrated Circuits......... 22,612,500 3.0% Telecommunication Services........................... 28,485,938 3.8% Tobacco.............................................. 22,000,000 2.9% Toys................................................. 5,054,000 0.7% ------------ Total Common Stock................................... 707,522,410 94.6% ------------ SHORT-TERM INVESTMENT Time Deposits........................................ 36,910,000 4.9% ------------ Total Short-Term Investments......................... 36,910,000 4.9% ------------ TOTAL INVESTMENTS.................................... 744,432,410 99.5% Other Assets Less Liabilities........................ 3,853,610 0.5% ------------ NET ASSETS........................................... $748,286,020 100.0% ============
42 NOTES TO FINANCIAL STATEMENTS--(Concluded) 7. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 2000--(Concluded) The value of the investments of the Fund's portfolios are determined using the following valuation techniques: Portfolio securities that are traded on domestic stock exchanges are valued at the last price as of the close of business on the day the securities are being valued. Lacking any sales, securities are valued at the mean between closing bid and asked prices (except for the Loomis Sayles High Yield Bond Portfolio, which values such securities at last bid price). Securities trading primarily on non-domestic exchanges are valued at the preceding closing price on the exchange where it primarily trades (or in the case of Loomis Sayles High Yield Bond and Scudder Global Equity Portfolios, the last sale). A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for that security by the Board of Directors or its delegates. If no closing price is available, then such securities are valued, first, by using the mean between last current bid and asked prices or, second, by using the last available closing price (except for the Scudder Global Equity Portfolio, which second values such securities at the last current bid) or, third, by using the last available price. Domestic securities, other than those held in the Money Market Fund, traded on over-the-counter markets are valued at the mean between the bid and asked prices or yield equivalent as obtained from two or more dealers that make markets in the securities (except for the Loomis Sayles High Yield Bond Portfolio, which would value such security, first, at the last sale price and, second, at the bid price or the Scudder Global Equity and the Neuberger Berman Partners Mid Cap Value Portfolios that value such securities, first, at last sale price and, second, at last bid price). All non-U.S. securities traded on over-the-counter securities markets are valued at the last sale quote, if market quotations are available, or the last closing bid price if there is no active trading in a particular security for a given day (except the Neuberger Berman Partners Mid Cap Value Portfolio, which is valued at the mean between closing bid and asked prices). Where market quotations are not readily available for such non-domestic, over-the-counter securities, then such securities will be valued in good faith by a method that the Board of Directors or its delegates believe accurately reflects fair value. Portfolio securities that are traded both on over-the-counter markets and on a stock exchange are valued according to the broadest and most representative market. For debt securities, this ordinarily will be the over-the-counter market. Securities and assets for which market quotations are not readily available (e.g. certain long term bonds and notes) are valued at fair value as determined in good faith by or under the direction of the Board of Directors, including valuations furnished by a pricing service retained for this purpose and typically utilized by other institutional-sized trading organizations. Forward foreign exchange contracts are valued based on the closing prices of the forward currency contract rates in London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Short-term instruments with a remaining maturity of sixty days or less are valued utilizing the amortized cost method of valuation. If for any reason the fair value of any security is not fairly reflected by such method, such security will be valued by the same method as securities having a maturity of more than sixty days. Options on securities, indices, or futures contracts are valued at the last sales price available as of the close of business on the day of valuation. If no sales have occurred, options are valued at the mean between bid and asked prices. Options on currencies are valued at the spot price each day. As a general matter, futures contracts are marked-to market daily. The value of futures contracts will be the sum of the margin deposits plus or minus the difference between the value of the futures contract on each day the net asset value is calculated and the value on the date the futures contract originated. For this purpose, value is the value established on a recognized commodity exchange, or by reference to other customary sources, with gain or loss being realized when the futures contract closes or expires. 8. PURCHASES AND SALES OF INVESTMENTS SECURITIES The aggregate costs of purchases and proceeds from sales of investments (other than short-term securities) for the year ended December 31, 2000 were $492,553,961 and $173,826,338, respectively. Gains and losses from sales of investments are computed on the basis of average cost. 43 35 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Financial Statements as of December 31, 2000 and 1999 and for Each of the Three Years in the Period Ended December 31, 2000 and Independent Auditors' Report F-1 Independent Auditors' Report The Board of Directors and Shareholder of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Metropolitan Life Insurance Company and subsidiaries as of December 31, 2000 and 1999, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP New York, New York February 9, 2001 F-2 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 and 1999 (Dollars in millions)
2000 1999 -------- -------- ASSETS Investments: Fixed maturities available-for-sale, at fair value......... $112,445 $ 96,981 Equity securities, at fair value........................... 2,193 2,006 Mortgage loans on real estate.............................. 21,951 19,739 Real estate and real estate joint ventures................. 5,504 5,649 Policy loans............................................... 8,158 5,598 Other limited partnership interests........................ 1,652 1,331 Short-term investments..................................... 930 3,055 Other invested assets...................................... 2,898 1,501 -------- -------- Total investments.......................................... 155,731 135,860 Cash and cash equivalents................................... 3,419 2,789 Accrued investment income................................... 2,040 1,725 Premiums and other receivables.............................. 8,732 6,681 Deferred policy acquisition costs........................... 10,497 9,070 Deferred income taxes....................................... -- 603 Other assets................................................ 3,823 3,563 Separate account assets..................................... 70,250 64,941 -------- -------- Total assets............................................... $254,492 $225,232 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Future policy benefits...................................... $ 81,966 $ 73,582 Policyholder account balances............................... 54,309 45,901 Other policyholder funds.................................... 5,583 4,498 Policyholder dividends payable.............................. 1,082 974 Policyholder dividend obligation............................ 385 -- Short-term debt............................................. 1,094 4,208 Long-term debt.............................................. 3,443 2,514 Current income taxes payable................................ 127 548 Deferred income taxes payable............................... 742 -- Payables under securities loaned transactions............... 12,301 6,461 Other liabilities........................................... 7,076 7,915 Separate account liabilities................................ 70,250 64,941 -------- -------- Total liabilities.......................................... 238,358 211,542 -------- -------- Commitments and contingencies (Note 10) Company-obligated mandatorily redeemable securities of subsidiary trust........................................... 118 -- -------- -------- Stockholder's Equity: Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding................................................ 5 -- Additional paid-in capital.................................. 14,549 -- Retained earnings........................................... 407 14,100 Accumulated other comprehensive income (loss)............... 1,055 (410) -------- -------- Total stockholder's equity................................. 16,016 13,690 -------- -------- Total liabilities and stockholder's equity................. $254,492 $225,232 ======== ========
See accompanying notes to consolidated financial statements. F-3 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998 (Dollars in millions)
2000 1999 1998 ------- ------- ------- REVENUES Premiums............................................ $16,263 $12,088 $11,503 Universal life and investment-type product policy fees............................................... 1,820 1,433 1,360 Net investment income............................... 11,773 9,816 10,228 Other revenues...................................... 2,462 2,154 1,994 Net investment (losses) gains (net of amounts allocable to other accounts of $(54), $(67) and $608, respectively)................................ (418) (70) 2,021 ------- ------- ------- Total revenues..................................... 31,900 25,421 27,106 ------- ------- ------- EXPENSES Policyholder benefits and claims (excludes amounts directly related to net investment gains (losses) of $41, $(21) and $368, respectively).............. 16,935 13,100 12,638 Interest credited to policyholder account balances.. 2,935 2,441 2,711 Policyholder dividends.............................. 1,913 1,690 1,651 Payments to former Canadian policyholders........... 327 -- -- Demutualization costs............................... 230 260 6 Other expenses (excludes amounts directly related to net investment (losses) gains of $(95), $(46) and $240, respectively)................................ 8,134 6,755 8,019 ------- ------- ------- Total expenses..................................... 30,474 24,246 25,025 ------- ------- ------- Income before provision for income taxes............ 1,426 1,175 2,081 Provision for income taxes.......................... 477 558 738 ------- ------- ------- Net income.......................................... $ 949 $ 617 $ 1,343 ======= ======= ======= Net income after April 7, 2000 (date of demutualization) (Note 1).......................... $ 1,169 =======
See accompanying notes to consolidated financial statements. F-4 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998 (Dollars in millions)
Accumulated Other Comprehensive Income (Loss) ------------------------------------- Foreign Minimum Additional Net Unrealized Currency Pension Common Paid-in Retained Investment Translation Liability Stock Capital Earnings Gains (Losses) Adjustment Adjustment Total ------ ---------- -------- -------------- ----------- ---------- ------- Balance at January 1, 1998................... $ -- $ -- $12,140 $1,898 $ (31) $ -- $14,007 Comprehensive income: Net income............. 1,343 1,343 Other comprehensive loss: Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes................. (358) (358) Foreign currency translation adjustments........... (113) (113) Minimum pension liability adjustment.. (12) (12) ------- Other comprehensive loss.................. (483) ------- Comprehensive income... 860 ----- ------- ------- ------ ----- ----- ------- Balance at December 31, 1998................... -- -- 13,483 1,540 (144) (12) 14,867 Comprehensive loss: Net income............. 617 617 Other comprehensive loss: Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes................. (1,837) (1,837) Foreign currency translation adjustments........... 50 50 Minimum pension liability adjustment.. (7) (7) ------- Other comprehensive loss.................. (1,794) ------- Comprehensive loss..... (1,177) ----- ------- ------- ------ ----- ----- ------- Balance at December 31, 1999................... -- -- 14,100 (297) (94) (19) 13,690 Policy credits and cash payments to eligible policyholders.......... (2,958) (2,958) Common stock issued in demutualization........ 5 10,917 (10,922) -- Capital contribution from Parent............ 3,632 3,632 Dividends on common stock.................. (762) (762) Comprehensive income: Net loss before date of demutualization....... (220) (220) Net income after date of demutualization.... 1,169 1,169 Other comprehensive income: Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes................. 1,480 1,480 Foreign currency translation adjustments........... (6) (6) Minimum pension liability adjustment.. (9) (9) ------- Other comprehensive income................ 1,465 ------- Comprehensive income... 2,414 ----- ------- ------- ------ ----- ----- ------- Balance at December 31, 2000................... $ 5 $14,549 $ 407 $1,183 $(100) $ (28) $16,016 ===== ======= ======= ====== ===== ===== =======
See accompanying notes to consolidated financial statements. F-5 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998 (Dollars in millions)
2000 1999 1998 -------- -------- -------- Cash flows from operating activities Net Income....................................... $ 949 $ 617 $ 1,343 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses......... 498 173 56 Gains (losses) from sales of investments and businesses, net............................... 471 137 (2,629) Change in undistributed income of real estate joint ventures and other limited partnership interests..................................... (200) (322) (91) Interest credited to other policyholder account balances...................................... 2,935 2,441 2,711 Universal life and investment-type product policy fees................................... (1,820) (1,433) (1,360) Change in accrued investment income............ (171) 269 (181) Change in premiums and other receivables....... (931) (619) (2,681) Change in deferred policy acquisition costs, net........................................... (880) (389) (188) Change in insurance-related liabilities........ 3,144 2,243 1,481 Change in income taxes payable................. 246 22 251 Change in other liabilities.................... (2,180) 857 2,390 Other, net..................................... (764) (131) (260) -------- -------- -------- Net cash provided by operating activities........ 1,297 3,865 842 -------- -------- -------- Cash flows from investing activities Sales, maturities and repayments of: Fixed maturities............................... 57,295 73,120 57,857 Equity securities.............................. 899 760 3,085 Mortgage loans on real estate.................. 2,163 1,992 2,296 Real estate and real estate joint ventures..... 655 1,062 1,122 Other limited partnership interests............ 422 469 146 Purchases of: Fixed maturities............................... (63,991) (72,253) (67,543) Equity securities.............................. (863) (410) (854) Mortgage loans on real estate.................. (2,836) (4,395) (2,610) Real estate and real estate joint ventures..... (407) (341) (423) Other limited partnership interests............ (660) (465) (723) Net change in short-term investments............ 2,382 (1,577) (761) Net change in policy loans...................... (315) 2 133 Purchase of businesses, net of cash received.... (416) (2,972) -- Proceeds from sales of businesses............... 877 -- 7,372 Net change in payable under securities loaned transactions................................... 5,840 2,692 3,769 Other, net...................................... (623) (73) (183) -------- -------- -------- Net cash provided by (used in) investing activities...................................... $ 422 $ (2,389) $ 2,683 -------- -------- --------
F-6 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998 (Dollars in millions)
2000 1999 1998 -------- -------- -------- Cash flows from financing activities Policyholder account balances: Deposits...................................... $ 28,834 $ 18,428 $ 19,361 Withdrawals................................... (28,235) (20,650) (21,706) Net change in short-term debt.................. (3,114) 623 (1,002) Long-term debt issued.......................... 1,230 44 693 Long-term debt repaid.......................... (124) (433) (481) Capital contribution from Parent............... 3,632 -- -- Cash payments to eligible policyholders........ (2,550) -- -- Dividends on common stock...................... (762) -- -- -------- -------- -------- Net cash used in financing activities........... (1,089) (1,988) (3,135) -------- -------- -------- Change in cash and cash equivalents............. 630 (512) 390 Cash and cash equivalents, beginning of year.... 2,789 3,301 2,911 -------- -------- -------- Cash and cash equivalents, end of year.......... $ 3,419 $ 2,789 $ 3,301 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest....................................... $ 440 $ 388 $ 367 ======== ======== ======== Income taxes................................... $ 222 $ 587 $ 579 ======== ======== ======== Non-cash transactions during the year: Policy credits to eligible policyholders....... $ 408 $ -- $ -- ======== ======== ======== Business acquisitions--assets.................. $ 22,936 $ 4,832 $ -- ======== ======== ======== Business acquisitions--liabilities............. $ 22,437 $ 1,860 $ -- ======== ======== ======== Business dispositions--assets.................. $ 1,879 $ -- $ 10,663 ======== ======== ======== Business dispositions--liabilities............. $ 1,686 $ -- $ 3,691 ======== ======== ======== Real estate acquired in satisfaction of debt... $ 22 $ 37 $ 69 ======== ======== ========
See accompanying notes to consolidated financial statements. F-7 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Summary Of Significant Accounting Policies Business Metropolitan Life Insurance Company ("Metropolitan Life") and its subsidiaries (the "Company") is a leading provider of insurance and financial services to a broad section of institutional and individual customers. The Company offers life insurance, annuities and mutual funds to individuals and group insurance, reinsurance and retirement and savings products and services to corporations and other institutions. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The New York State Insurance Department (the "Department") recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company for determining solvency under the New York Insurance Law. No consideration is given by the Department to financial statements prepared in accordance with GAAP in making such determination. The preparation of financial statements in conformity GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates include those used in determining deferred policy acquisition costs, investment allowances and the liability for future policyholder benefits. Actual results could differ from those estimates. The accompanying consolidated financial statements include the accounts of Metropolitan Life and subsidiaries, partnerships and joint ventures in which the Company has a majority voting interest or general partner interest with limited removal rights by limited partners. Closed block assets, liabilities, revenues and expenses are combined on a line by line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item. Intercompany accounts and transactions have been eliminated. The Company uses the equity method to account for its investments in real estate joint ventures and other limited partnership interests in which it does not have a controlling interest, but has more than a minimal interest. Minority interest related to consolidated entities included in other liabilities was $479 million and $245 million at December 31, 2000 and 1999, respectively. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2000 presentation. Demutualization On April 7, 2000 (the "date of demutualization"), Metropolitan Life converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. ("MetLife" or the "Holding Company"), a Delaware corporation. The conversion was pursuant to an order by the New York Superintendent of Insurance ("Superintendent") approving Metropolitan Life's plan of reorganization, as amended (the "plan"). On the date of demutualization, policyholders' membership interests in Metropolitan Life were extinguished and eligible policyholders received, in exchange for their interests, trust interests representing 494,466,664 shares of common stock of MetLife to be held in a trust, cash payments aggregating $2,550 million and adjustments to their policy values in the form of policy credits aggregating $408 million, as provided in the plan. In addition, Metropolitan Life's Canadian branch made cash payments of $327 million to holders of certain policies transferred to Clarica Life Insurance Company in connection with the sale of a substantial portion of Metropolitan Life's Canadian operations in 1998, as a result of a commitment made in connection with obtaining Canadian regulatory approval of that sale. F-8 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Earnings After Date of Demutualization Net income after the date of demutualization is based on the results of operations after March 31, 2000, adjusted for the payments to the former Canadian policyholders and costs of demutualization recorded in April 2000 which are applicable to the period prior to April 7, 2000. Investments The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities are recorded as a separate component of other comprehensive income (loss), net of policyholder related amounts and deferred income taxes. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other than temporary. These adjustments are recorded as investment losses. Investment gains and losses on sales of securities are determined on a specific identification basis. All security transactions are recorded on a trade date basis. Mortgage loans on real estate are stated at amortized cost, net of valuation allowances. Valuation allowances are established for the excess carrying value of the mortgage loan over its estimated fair value when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are based upon the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. Interest income earned on impaired loans is accrued on the net carrying value amount of the loan based on the loan's effective interest rate. However, interest ceases to be accrued for loans on which interest is more than 60 days past due. Real estate, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 40 years). Cost is adjusted for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Impaired real estate is written down to estimated fair value with the impairment loss being included in net investment gains (losses). Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired in satisfaction of debt is recorded at estimated fair value at the date of foreclosure. Valuation allowances on real estate held-for-sale are computed using the lower of depreciated cost or estimated fair value, net of disposition costs. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. Derivative Instruments The Company uses derivative instruments to reduce the risk associated with changing market values or variable cash flows related to the Company's financial assets and liabilities. This objective is achieved through one of two principal risk management strategies: hedging the changes in fair value of financial assets, liabilities or firm commitments or hedging the variable cash flows of assets, liabilities or forecasted transactions. Hedged forecasted transactions, other than the receipt or payment of variable interest payments, are not expected to occur more than 12 months after hedge inception. The Company's derivative strategy employs a variety of instruments including financial futures, financial forwards, interest rate and foreign currency swaps, floors, foreign exchange contracts, caps and options. The Company's derivative program is monitored by senior management. The Company's risk of loss is typically limited to the fair value of its derivative instruments and not to the notional or contractual amounts of these derivatives. Risk arises from changes in the fair value of the underlying instruments and, with respect to over-the-counter transactions, from the possible inability of counterparties to meet the terms of the contracts. The Company has policies regarding the financial stability and credit standing of its major counterparties. F-9 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company uses derivative instruments to hedge designated risks. The hedge is expected to be highly effective in offsetting the designated risk at the inception of the contract. The Company monitors the effectiveness of its hedges throughout the contract term using an offset ratio of 80 to 125 percent as its minimum acceptable threshold for hedge effectiveness. During any period the derivative instruments are outside their threshold for hedge effectiveness, or if the relationship no longer qualifies as a hedge, all changes in the derivative's value are marked to market through net investment gains and losses. Gains or losses on financial futures contracts entered into in anticipation of investment transactions are deferred and, at the time of the ultimate investment purchase or disposition, recorded as an adjustment to the basis of the purchased assets or to the proceeds on disposition. Gains or losses on financial futures used in asset risk management are deferred and amortized into net investment income over the remaining term of the investment. Gains or losses on financial futures used in portfolio risk management are deferred and amortized into net investment income or policyholder benefits over the remaining life of the hedged sector of the underlying portfolio. Financial forward contracts that are entered into to purchase securities are marked to fair value through other comprehensive income, similar to the accounting for the security to be purchased. Such contracts are accounted for at settlement by recording the purchase of the specified securities at the contracted value. Gains or losses resulting from the termination of forward contracts are recognized immediately as a component of net investment gains (losses). Interest rate and certain foreign currency swaps involve the periodic exchange of payments without the exchange of underlying principal or notional amounts. Net receipts or payments are accrued and recognized over the term of the swap agreement as an adjustment to net investment income or other expenses. Gains or losses resulting from swap terminations are amortized over the remaining term of the underlying asset or liability. Gains and losses on swaps and certain foreign forward exchange contracts entered into in anticipation of investment transactions are deferred and, at the time of the ultimate investment purchase or disposition, reflected as an adjustment to the basis of the purchased assets or to the proceeds of disposition. In the event the asset or liability underlying a swap is disposed of, the swap position is closed immediately and any gain or loss is recorded in net investment gains and losses. The Company periodically enters into collars, which consist of purchased put and written call options, to lock in unrealized gains on equity securities. Collars are marked to market through other comprehensive income (loss), similar to the accounting for the underlying equity securities. Purchased interest rate caps and floors are used to offset the risk of interest rate changes related to insurance liabilities. Premiums paid on floors, caps and options are amortized over the life of the applicable derivative instrument. Any gains or losses relating to these derivative instruments are deferred and are recognized as a component of net investment income over the original term of the derivative instrument. Cash and Cash Equivalents The Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using either the straight-line or sum-of-the-years- digits method over the estimated useful lives of the assets. Estimated lives range from 10 to 40 years for leasehold improvements and three to 15 years for all other property and equipment. Accumulated depreciation of property and equipment and accumulated amortization on leasehold improvements was $1,304 million and $1,224 million at December 31, 2000 and 1999, respectively. Related depreciation and amortization expense was $120 million, $109 million and $116 million for the years ended December 31, 2000, 1999 and 1998, respectively. Deferred Policy Acquisition Costs The costs of acquiring new insurance business that vary with, and are primarily related to, the production of new business are deferred. Such costs, which consist principally of commissions, agency and policy issue expenses, are F-10 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) amortized with interest over the expected life of the contract for participating traditional life, universal life and investment-type products. Generally, deferred policy acquisition costs are amortized in proportion to the present value of estimated gross margins or profits from investment, mortality, expense margins and surrender charges. Interest rates are based on rates in effect at the inception or acquisition of the contracts. Actual gross margins or profits can vary from management's estimates resulting in increases or decreases in the rate of amortization. Management periodically updates these estimates and evaluates the recoverability of deferred policy acquisition costs. When appropriate, management revises its assumptions of the estimated gross margins or profits of these contracts, and the cumulative amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. Deferred policy acquisition costs for non-participating traditional life, non-medical health and annuity policies with life contingencies are amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are made at the date of policy issuance or acquisition and are consistently applied during the lives of the contracts. Deviations from estimated experience are included in operations when they occur. For these contracts, the amortization period is typically the estimated life of the policy. Deferred policy acquisition costs related to internally replaced contracts are expensed at date of replacement. Deferred policy acquisition costs for property and casualty insurance contracts, which are primarily comprised of commissions and certain underwriting expenses, are deferred and amortized on a pro rata basis over the applicable contract term or reinsurance treaty. Value of business acquired, included as part of deferred policy acquisition costs, represents the present value of future profits generated from existing insurance contracts in force at the date of acquisition and is amortized over the expected policy or contract duration in relation to the present value of estimated gross profits from such policies and contracts. Information regarding deferred policy acquisition costs is as follows:
Years ended December 31, ----------------------- 2000 1999 1998 ------- ------ ------ (Dollars in millions) Balance at January 1................................ $ 9,070 $7,028 $6,948 Capitalization of policy acquisition costs.......... 1,805 1,160 1,025 Value of business acquired.......................... 1,681 156 32 ------- ------ ------ Total........................................... 12,556 8,344 8,005 ------- ------ ------ Amortization allocated to: Net investment (losses) gains..................... (95) (46) 240 Unrealized investment gains (losses).............. 596 (1,628) (216) Other expenses.................................... 1,472 930 641 ------- ------ ------ Total amortization.............................. 1,973 (744) 665 ------- ------ ------ Dispositions and other.............................. (86) (18) (312) ------- ------ ------ Balance at December 31.............................. $10,497 $9,070 $7,028 ======= ====== ======
On September 28, 1999, Metropolitan Life's board of directors adopted a plan of reorganization. Consequently, in the fourth quarter of 1999, Metropolitan Life was able to commit to state insurance regulatory authorities that it would establish investment sub-segments to further align investments with the traditional individual life business of the Individual Business segment. As a result, future dividends for the traditional individual life business will be determined based on the results of such investment sub-segments. Additionally, estimated future gross margins used to determine amortization of deferred policy acquisition costs and the amount of unrealized investment gains and losses relating to these products are based on investments in such sub- segments. Using the investments in the sub-segments to determine estimated gross margins and unrealized investment gains and losses increased 1999 amortization of deferred policy acquisition costs by $56 million, net of income taxes of $32 million, and decreased other comprehensive loss in 1999 by $123 million, net of income taxes of $70 million. F-11 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Amortization of deferred policy acquisition costs is allocated to (1) investment gains and losses to provide consolidated statement of income information regarding the impact of such gains and losses on the amount of the amortization, (2) unrealized investment gains and losses to provide information regarding the amount of deferred policy acquisition costs that would have been amortized if such gains and losses had been recognized and (3) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. Investment gains and losses related to certain products have a direct impact on the amortization of deferred policy acquisition costs. Presenting investment gains and losses net of related amortization of deferred policy acquisition costs provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. Goodwill The excess of cost over the fair value of net assets acquired ("goodwill") is included in other assets. Goodwill is amortized on a straight-line basis over a period ranging from 10 to 30 years. The Company reviews goodwill to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in operating results if a permanent diminution in value is deemed to have occurred.
Years ended December 31 -------------------------- 2000 1999 1998 -------- ------- ------- (Dollars in millions) Net Balance at January 1............................ $ 611 $ 404 $ 359 Acquisitions........................................ 279 237 67 Amortization........................................ (62) (30) (22) Dispositions........................................ (125) -- -- -------- ------- ------- Net Balance at December 31.......................... $ 703 $ 611 $ 404 ======== ======= =======
December 31 ----------------------- 2000 1999 ---------- ----------- (Dollars in millions) Accumulated Amortization............................... $ 74 $ 118 ========== ===========
Future Policy Benefits and Policyholder Account Balances Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of (a) net level premium reserves for death and endowment policy benefits (calculated based upon the nonforfeiture interest rate, ranging from 3% to 11%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts), (b) the liability for terminal dividends and (c) premium deficiency reserves, which are established when the liabilities for future policy benefits plus the present value of expected future gross premiums are insufficient to provide for expected future policy benefits and expenses after deferred policy acquisition costs are written off. Future policy benefit liabilities for traditional annuities are equal to accumulated contractholder fund balances during the accumulation period and the present value of expected future payments after annuitization. Interest rates used in establishing such liabilities range from 3% to 12%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% to 11%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 11%. Policyholder account balances for universal life and investment-type contracts are equal to the policy account values, which consist of an accumulation of gross premium payments plus credited interest, ranging from 2% to 17%, less expenses, mortality charges and withdrawals. The liability for unpaid claims and claim expenses for property and casualty insurance represents the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that F-12 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation. Revisions of these estimates are included in operations in the year such refinements are made. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due. Benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Premiums related to non-medical health contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related policyholder account balances. Premiums related to property and casualty contracts are recognized as revenue on a pro rata basis over the applicable contract term. Unearned premiums are included in other liabilities. Policyholder Dividends Policyholder dividends are approved annually by the boards of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by the insurance subsidiaries. Participating Business Participating business represented approximately 22% and 19% of the Company's life insurance in-force, and 81% and 83% of the number of life insurance policies in-force, at December 31, 2000 and 1999, respectively. Participating policies represented approximately 47% and 50%, 50% and 54%, and 45% and 47% of gross and net life insurance premiums for the years ended December 31, 2000, 1999 and 1998, respectively. The percentages indicated are calculated excluding the business of the Reinsurance segment. Income Taxes Metropolitan Life and its includable life insurance and non-life insurance subsidiaries file a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code, as amended (the "Code"). Non-includable subsidiaries file either separate tax returns or separate consolidated tax returns. Under the Code, the amount of federal income tax expense incurred by mutual life insurance companies includes an equity tax calculated based upon a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. Metropolitan Life is not subject to the equity tax after the date of demutualization. The future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities are measured at the balance sheet dates and are recorded as deferred income tax assets and liabilities. Reinsurance The Company has reinsured certain of its life insurance and property and casualty insurance contracts with other insurance companies under various agreements. Amounts due from reinsurers are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Policy and contract liabilities are reported gross of reinsurance credits. Deferred policy acquisition costs are reduced by amounts F-13 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) recovered under reinsurance contracts. Amounts received from reinsurers for policy administration are reported in other revenues. The Company assumes and retrocedes financial reinsurance contracts, which represent low mortality risk reinsurance treaties. These contracts are reported as deposits and are included in other assets. The amount of revenue reported on these contracts represents fees and the cost of insurance under the terms of the reinsurance agreement. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Investments (stated at estimated fair value) and liabilities of the separate accounts are reported separately as assets and liabilities. Deposits to separate accounts, investment income and realized and unrealized gains and losses on the investments of the separate accounts accrue directly to contractholders and, accordingly, are not reflected in the Company's consolidated statements of income and cash flows. Mortality, policy administration and surrender charges to all separate accounts are included in revenues. Foreign Currency Translation Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income (loss). Gains and losses from foreign currency transactions are reported in earnings. Application of Accounting Pronouncements Effective December 31, 2000, the Company early adopted Statement of Position ("SOP") 00-3, Accounting by Insurance Enterprises for Demutualizations and Formations of Mutual Insurance Holding Companies and for Certain Long-Duration Participating Contracts ("SOP 00-3"). SOP 00-3 provides guidance on accounting by insurance enterprises for demutualizations and the formation of mutual insurance holding companies, including the emergence of earnings from and the financial statement presentation of the closed block formed as a part of a demutualization. Adoption of SOP 00-3 did not have a material effect on the Company's consolidated results of operations other than the reclassification of demutualization costs as operating expenses rather than as an extraordinary item. Effective October 1, 2000, the Company adopted Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of the Securities and Exchange Commission's views in applying generally accepted accounting principles to revenue recognition in financial statements. The requirements of SAB 101 did not have a material effect on the Company's consolidated financial statements. Effective January 1, 2000, the Company adopted Statement of Position 98-7, Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7"). SOP 98-7 provides guidance on the method of accounting for insurance and reinsurance contracts that do not transfer insurance risk, defined in the SOP as the deposit method. SOP 98-7 classifies insurance and reinsurance contracts for which the deposit method is appropriate into those that 1) transfer only significant timing risk, 2) transfer only significant underwriting risk, 3) transfer neither significant timing nor underwriting risk and 4) have an indeterminate risk. Adoption of SOP 98-7 did not have a material effect on the Company's consolidated financial statements. In September 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities--a replacement of FASB Statement No. 125 ("SFAS 140"). SFAS 140 is effective for transfers and extinguishments of liabilities occurring after March 31, 2001 and is effective for disclosures about securitizations and collateral and for recognition and reclassification of collateral for fiscal years ending after F-14 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 15, 2000. The Company is in the process of quantifying the impact, if any, of the provisions of SFAS 140 effective for future periods. Effective January 1, 1999, the Company adopted SOP 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 broadly defines start-up activities. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. Adoption of SOP 98-5 did not have a material effect on the Company's consolidated financial statements. Effective January 1, 1999, the Company adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98- 1"). SOP 98-1 provides guidance for determining when an entity should capitalize or expense external and internal costs of computer software developed or obtained for internal use. Adoption of the provisions of SOP 98-1 had the effect of increasing other assets by $82 million at December 31, 1999. Effective January 1, 1999, the Company adopted SOP 97-3, Accounting for Insurance and Other Enterprises for Insurance Related Assessments ("SOP 97- 3"). SOP 97-3 provides guidance on accounting by insurance and other enterprises for assessments related to insurance activities including recognition, measurement and disclosure of guaranty fund and other insurance related assessments. Adoption of SOP 97-3 did not have a material effect on the Company's consolidated financial statements. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities--an Amendment of FASB Statement No. 133 ("SFAS 138"). In June 1999, the FASB also issued Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137"). SFAS 137 deferred the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") until January 1, 2001. SFAS 133 and SFAS 138 require, among other things, that all derivatives be recognized in the consolidated balance sheets as either assets or liabilities and measured at fair value. The corresponding derivative gains and losses should be reported based upon the hedge relationship, if such a relationship exists. Changes in the fair value of derivatives that are not designated as hedges or that do not meet the hedge accounting criteria in SFAS 133 and SFAS 138, as of January 1, 2001, are required to be reported in income. The Company estimates that the cumulative effect of the adoption SFAS 133 and SFAS 138 will result in a $32 million, net of income taxes of $19 million, increase in other comprehensive income and an insignificant impact on net income. In July 2000, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 99-20, Recognition of Interest Income and Impairment on Certain Investments ("EITF No. 99-20"). This pronouncement requires investors in certain asset-backed securities to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other-than- temporary decline in value. This consensus is effective for financial statements with fiscal quarters beginning after December 15, 2000. While the Company currently is in the process of quantifying the impact of EITF No. 99- 20, the provisions of the consensus are not expected to have a material impact on the Company's consolidated financial statements. F-15 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2.Investments Fixed Maturities and Equity Securities Fixed maturities and equity securities at December 31, 2000 were as follows:
Gross Unrealized ----------------- Cost or Amortized Estimated Cost Gain Loss Fair Value --------- -------- -------- ---------- (Dollars in millions) Fixed Maturities: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agencies.......... $ 8,443 $ 1,188 $ 16 $ 9,615 States and political subdivisions... 1,563 79 3 1,639 Foreign governments................. 5,153 341 153 5,341 Corporate........................... 48,401 1,176 1,466 48,111 Mortgage and asset-backed securities......................... 32,996 697 165 33,528 Other............................... 13,872 384 366 13,890 -------- -------- -------- -------- Total bonds........................ 110,428 3,865 2,169 112,124 Redeemable preferred stocks......... 321 -- -- 321 -------- -------- -------- -------- Total fixed maturities............. $110,749 $ 3,865 $ 2,169 $112,445 ======== ======== ======== ======== Equity Securities: Common stocks....................... $ 872 $ 785 $ 55 $ 1,602 Nonredeemable preferred stocks...... 577 19 5 591 -------- -------- -------- -------- Total equity securities............ $ 1,449 $ 804 $ 60 $ 2,193 ======== ======== ======== ======== Fixed maturities and equity securities at December 31, 1999 were as follows: Gross Unrealized ----------------- Cost or Amortized Estimated Cost Gain Loss Fair Value --------- -------- -------- ---------- (Dollars in millions) Fixed Maturities: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agencies.......... $ 5,990 $ 456 $ 147 $ 6,299 States and political subdivisions... 1,583 4 45 1,542 Foreign governments................. 4,090 210 94 4,206 Corporate........................... 47,505 585 1,913 46,177 Mortgage and asset-backed securities......................... 27,396 112 847 26,661 Other............................... 12,235 313 462 12,086 -------- -------- -------- -------- Total bonds........................ 98,799 1,680 3,508 96,971 Redeemable preferred stocks......... 10 -- -- 10 -------- -------- -------- -------- Total fixed maturities............. $ 98,809 $ 1,680 $ 3,508 $ 96,981 ======== ======== ======== ======== Equity Securities: Common stocks....................... $ 980 $ 921 $ 35 $ 1,866 Nonredeemable preferred stocks...... 151 -- 11 140 -------- -------- -------- -------- Total equity securities............ $ 1,131 $ 921 $ 46 $ 2,006 ======== ======== ======== ========
The Company held foreign currency derivatives with notional amounts of $3,885 million and $4,002 million to hedge the exchange rate risk associated with foreign bonds at December 31, 2000 and 1999, respectively. At December 31, 2000, fixed maturities at estimated fair values held by the Company that were below investment grade or not rated by an independent rating agency totaled $9,864 million. At December 31, 2000, non-income producing fixed maturities were insignificant. F-16 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The cost or amortized cost and estimated fair value of bonds at December 31, 2000, by contractual maturity date, are shown below:
Cost or Amortized Estimated Cost Fair Value --------- ---------- (Dollars in millions) Due in one year or less................................. $ 3,465 $ 3,460 Due after one year through five years................... 21,041 21,275 Due after five years through ten years.................. 23,831 23,904 Due after ten years..................................... 29,095 29,957 -------- -------- Total................................................. 77,432 78,596 Mortgage and asset-backed securities.................... 32,996 33,528 -------- -------- Total bonds........................................... $110,428 $112,124 ======== ========
Bonds not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales of securities classified as available-for-sale were as follows:
Years ended December 31, ----------------------- 2000 1999 1998 ------- ------- ------- (Dollars in millions) Proceeds............................................ $46,205 $59,852 $46,913 Gross investment gains.............................. $ 599 $ 605 $ 2,053 Gross investment losses............................. $ 1,520 $ 911 $ 486
Gross investment losses above exclude writedowns recorded during 2000 and 1999 for permanently impaired available-for-sale securities of $324 million and $133 million, respectively. Excluding investments in U.S. Treasury securities and obligations of U.S. government corporations and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturities portfolio. Securities Lending Program The Company participates in securities lending programs whereby blocks of securities, which are included in investments, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $11,746 million and $6,458 million and estimated fair value of $12,289 million and $6,391 million were on loan under the program at December 31, 2000 and 1999, respectively. The Company was liable for cash collateral under its control of $12,301 million and $6,461 million at December 31, 2000 and 1999, respectively. Security collateral on deposit from customers may not be sold or repledged and is not reflected in the consolidated financial statements. Assets on Deposit and Held in Trust The Company had investment assets on deposit with regulatory agencies with a fair market value of $597 million and $476 million at December 31, 2000 and 1999, respectively. Company securities held in trust to satisfy collateral requirements had an amortized cost of $1,234 million at December 31, 2000. F-17 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Mortgage Loans on Real Estate Mortgage loans on real estate were categorized as follows:
December 31 ------------------------------- 2000 1999 --------------- --------------- Amount Percent Amount Percent ------- ------- ------- ------- (Dollars in millions) Commercial mortgage loans.................... $16,944 77% $14,931 75% Agricultural mortgage loans.................. 4,980 22 4,816 24 Residential mortgage loans................... 110 1 82 1 ------- --- ------- --- Total...................................... 22,034 100% 19,829 100% === === Less: Valuation allowances................... 83 90 ------- ------- Mortgage loans............................. $21,951 $19,739 ======= =======
Mortgage loans on real estate are collateralized by properties primarily located throughout the United States. At December 31, 2000, approximately 16%, 7% and 6% of the properties were located in California, New York and Georgia, respectively. Generally, the Company (as the lender) requires that a minimum of one-fourth of the purchase price of the underlying real estate be paid by the borrower. Certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $540 million and $547 million at December 31, 2000 and 1999, respectively. Changes in mortgage loan valuation allowances were as follows:
Years ended December 31, --------------------------- 2000 1999 1998 -------- -------- -------- (Dollars in millions) Balance at January 1............................ $ 90 $ 173 $ 289 Additions....................................... 38 40 40 Deductions for writedowns and dispositions...... (74) (123) (130) Acquisitions (dispositions) of affiliates....... 29 -- (26) ------- -------- -------- Balance at December 31.......................... $ 83 $ 90 $ 173 ======= ======== ========
A portion of the Company's mortgage loans on real estate was impaired and consisted of the following:
December 31, --------------------- 2000 1999 ---------- ---------- (Dollars in millions) Impaired mortgage loans with valuation allowances...... $ 592 $ 540 Impaired mortgage loans without valuation allowances... 330 437 ---------- ---------- Total................................................ 922 977 Less: Valuation allowances............................. 77 83 ---------- ---------- Impaired mortgage loans.............................. $ 845 $ 894 ========== ==========
The average investment in impaired mortgage loans on real estate was $912 million, $1,134 million and $1,282 million for the years ended December 31, 2000, 1999 and 1998, respectively. Interest income on impaired mortgage loans was $76 million, $101 million and $109 million for the years ended December 31, 2000, 1999 and 1998, respectively. The investment in restructured mortgage loans on real estate was $784 million and $980 million at December 31, 2000 and 1999, respectively. Interest income of $62 million, $80 million and $74 million was recognized on restructured loans for the years ended December 31, 2000, 1999 and 1998, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $74 million, $92 million and $87 million for the years ended December 31, 2000, 1999 and 1998, respectively. F-18 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Mortgage loans on real estate with scheduled payments of 60 days (90 days for agriculture mortgages) or more past due or in foreclosure had an amortized cost of $40 million and $44 million at December 31, 2000 and 1999, respectively. Real Estate and Real Estate Joint Ventures Real estate and real estate joint ventures consisted of the following:
December 31, ---------------------- 2000 1999 ---------- ---------- (Dollars in millions) Real estate and real estate joint ventures held- for-investment.................................... $ 5,495 $ 5,440 Impairments........................................ (272) (289) ---------- ---------- Total............................................ 5,223 5,151 ---------- ---------- Real estate and real estate joint ventures held- for-sale.......................................... 417 719 Impairments........................................ (97) (187) Valuation allowance................................ (39) (34) ---------- ---------- Total............................................ 281 498 ---------- ---------- Real estate and real estate joint ventures..... $ 5,504 $ 5,649 ========== ==========
Accumulated depreciation on real estate was $2,337 million and $2,235 million at December 31, 2000 and 1999, respectively. Related depreciation expense was $224 million, $247 million and $282 million for the years ended December 31, 2000, 1999 and 1998, respectively. Real estate and real estate joint ventures were categorized as follows:
December 31, ----------------------------- 2000 1999 -------------- -------------- Amount Percent Amount Percent ------ ------- ------ ------- (Dollars in millions) Office......................................... $3,635 66% $3,846 68% Retail......................................... 586 10 587 10 Apartments..................................... 558 10 474 8 Land........................................... 202 4 258 5 Agriculture.................................... 84 2 96 2 Other.......................................... 439 8 388 7 ------ --- ------ --- Total........................................ $5,504 100% $5,649 100% ====== === ====== ===
The Company's real estate holdings are primarily located throughout the United States. At December 31, 2000, approximately 26%, 25% and 10% of the Company's real estate holdings were located in New York, California and Texas, respectively. Changes in real estate and real estate joint ventures held-for-sale valuation allowance were as follows:
Years ended December 31, ---------------- 2000 1999 1998 ---- ---- ---- (Dollars in millions) Balance at January 1....................................... $ 34 $ 33 $110 Additions charged (credited) to operations................. 17 36 (5) Deductions for writedowns and dispositions................. (12) (35) (72) ---- ---- ---- Balance at December 31..................................... $ 39 $ 34 $ 33 ==== ==== ====
F-19 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Investment income related to impaired real estate and real estate joint ventures held-for-investment was $45 million, $61 million and $105 million for the years ended December 31, 2000, 1999 and 1998, respectively. Investment income related to impaired real estate and real estate joint ventures held- for-sale was $18 million, $14 million and $3 million for the years ended December 31, 2000, 1999 and 1998, respectively. The carrying value of non- income producing real estate and real estate joint ventures was $15 million and $22 million at December 31, 2000 and 1999, respectively. The Company owned real estate acquired in satisfaction of debt of $66 million and $47 million at December 31, 2000 and 1999, respectively. Leveraged Leases Leveraged leases, included in other invested assets, consisted of the following:
December 31, ---------------------- 2000 1999 ---------- ---------- (Dollars in millions) Investment........................................... $ 1,002 $ 1,016 Estimated residual values............................ 546 559 ---------- ---------- Total.............................................. 1,548 1,575 Unearned income...................................... (384) (417) ---------- ---------- Leveraged leases................................... $ 1,164 $ 1,158 ========== ==========
The investment amounts set forth above are generally due in monthly installments. The payment periods generally range from three to 15 years, but in certain circumstances are as long as 30 years. These receivables are generally collateralized by the related property. Net Investment Income The components of net investment income were as follows:
Years ended December 31, ----------------------- 2000 1999 1998 ------- ------- ------- (Dollars in millions) Fixed maturities..................................... $ 8,529 $ 7,171 $ 6,990 Equity securities.................................... 41 40 78 Mortgage loans on real estate........................ 1,693 1,484 1,580 Real estate and real estate joint ventures........... 1,407 1,426 1,529 Policy loans......................................... 515 340 387 Other limited partnership interests.................. 142 199 196 Cash, cash equivalents and short-term investments.... 271 173 187 Other................................................ 192 91 406 ------- ------- ------- Total.............................................. 12,790 10,924 11,353 Less: Investment expenses............................ 1,017 1,108 1,125 ------- ------- ------- Net investment income.............................. $11,773 $ 9,816 $10,228 ======= ======= =======
F-20 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Net Investment Gains (Losses) Net investment gains (losses), including changes in valuation allowances, were as follows:
Years ended December 31, ---------------------- 2000 1999 1998 ------- ----- ------ (Dollars in millions) Fixed maturities..................................... $(1,437) $(538) $ 573 Equity securities.................................... 192 99 994 Mortgage loans on real estate........................ (18) 28 23 Real estate and real estate joint ventures........... 101 265 424 Other limited partnership interests.................. (7) 33 13 Sales of businesses.................................. 632 -- 531 Other................................................ 65 (24) 71 ------- ----- ------ Total.............................................. (472) (137) 2,629 Amounts allocable to: Future policy benefit loss recognition............. -- -- (272) Deferred policy acquisition costs.................. 95 46 (240) Participating contracts............................ (126) 21 (96) Policyholder dividend obligation................... 85 -- -- ------- ----- ------ Net investment (losses) gains.................... $ (418) $ (70) $2,021 ======= ===== ======
Investment gains and losses have been reduced by (1) additions to future policy benefits resulting from the need to establish additional liabilities due to the recognition of investment gains, (2) deferred policy acquisition cost amortization to the extent that such amortization results from investment gains and losses, (3) additions to participating contractholder accounts when amounts equal to such investment gains and losses are credited to the contractholders' accounts, and (4) adjustments to the policyholder dividend obligation resulting from investment gains and losses. This presentation may not be comparable to presentations made by other insurers. Net Unrealized Investment Gains (Losses) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), were as follows:
Years ended December 31, ------------------------- 2000 1999 1998 ------- ------- ------- (Dollars in millions) Fixed maturities................................... $ 1,696 $(1,828) $ 4,809 Equity securities.................................. 744 875 832 Other invested assets.............................. 70 165 154 ------- ------- ------- Total............................................ 2,510 (788) 5,795 ------- ------- ------- Amounts allocable to: Future policy benefit loss recognition........... (284) (249) (2,248) Deferred policy acquisition costs................ 101 697 (931) Participating contracts.......................... (133) (118) (212) Policyholder dividend obligation................. (385) -- -- Deferred income taxes.............................. (626) 161 (864) ------- ------- ------- Total............................................ (1,327) 491 (4,255) ------- ------- ------- Net unrealized investment gains (losses)....... $ 1,183 $ (297) $ 1,540 ======= ======= =======
F-21 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The changes in net unrealized investment gains (losses) were as follows:
Years ended December 31, ----------------------- 2000 1999 1998 ------ ------- ------ (Dollars in millions) Balance at January 1............................... $ (297) $ 1,540 $1,898 Unrealized investment gains (losses) during the year.............................................. 3,298 (6,583) (870) Unrealized investment gains (losses) relating to: Future policy benefit loss recognition........... (35) 1,999 (59) Deferred policy acquisition costs................ (596) 1,628 216 Participating contracts.......................... (15) 94 100 Policyholder dividend obligation................. (385) -- -- Deferred income taxes.............................. (787) 1,025 255 ------ ------- ------ Balance at December 31............................. $1,183 $ (297) $1,540 ====== ======= ====== Net change in unrealized investment gains (losses). $1,480 $(1,837) $ (358) ====== ======= ======
3. Derivative Instruments The table below provides a summary of the carrying value, notional amount and current market or fair value of derivative financial instruments held at December 31, 2000 and 1999:
2000 1999 ------------------------------------ ------------------------------------ Current Market Current Market or Fair Value or Fair Value Carrying Notional ------------------ Carrying Notional ------------------ Value Amount Assets Liabilities Value Amount Assets Liabilities -------- -------- ------ ----------- -------- -------- ------ ----------- (Dollars in millions) Financial futures....... $23 $ 254 $ 23 $-- $ 27 $ 3,140 $37 $ 10 Interest rate swaps..... 41 1,549 49 1 (32) 1,316 11 40 Floors.................. -- 325 3 -- -- -- -- -- Caps.................... -- 9,950 -- -- 1 12,376 3 -- Foreign currency swaps.. (1) 1,469 267 85 -- 4,002 26 103 Exchange traded options. 1 10 -- 1 -- -- -- -- --- ------- ---- ---- ---- ------- --- ---- Total contractual commitments........... $64 $13,557 $342 $ 87 $ (4) $20,834 $77 $153 === ======= ==== ==== ==== ======= === ====
The following is a reconciliation of the notional amounts by derivative type and strategy at December 31, 2000 and 1999:
December 31, 1999 Terminations/ December 31, 2000 Notional Amount Additions Maturities Notional Amount ----------------- --------- ------------- ----------------- (Dollars in millions) BY DERIVATIVE TYPE Financial futures....... $ 3,140 $14,255 $17,141 $ 254 Financial forwards...... -- 12 12 -- Interest rate swaps..... 1,316 1,605 1,372 1,549 Floors.................. -- 325 -- 325 Caps.................... 12,376 1,000 3,426 9,950 Foreign currency swaps.. 4,002 687 3,220 1,469 Exchange traded options. -- 41 31 10 ------- ------- ------- ------- Total contractual com- mitments............. $20,834 $17,925 $25,202 $13,557 ======= ======= ======= ======= BY STRATEGY Liability hedging....... $12,571 $ 2,876 $ 3,830 $11,617 Invested asset hedging.. 4,215 781 3,310 1,686 Portfolio hedging....... 2,021 14,255 16,022 254 Anticipated transaction hedging................ 2,027 13 2,040 -- ------- ------- ------- ------- Total contractual com- mitments............. $20,834 $17,925 $25,202 $13,557 ======= ======= ======= =======
F-22 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 2000:
Remaining Life ------------------------------------------------------------- One Year After One Year After Five Years or Less Through Five Years Through Ten Years After Ten Years Total -------- ------------------ ----------------- --------------- ------- (Dollars in millions) Financial futures....... $ 254 $ -- $ -- $-- $ 254 Interest rate swaps..... 243 714 268 324 1,549 Floors.................. -- -- 325 -- 325 Caps.................... 5,210 4,740 -- -- 9,950 Foreign currency swaps.. 91 508 685 185 1,469 Exchange traded options. 10 -- -- -- 10 ------ ------ ------ ---- ------- Total contractual commitments........... $5,808 $5,962 $1,278 $509 $13,557 ====== ====== ====== ==== =======
4.Fair Value Information The estimated fair values of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments were as follows:
Notional Carrying Estimated Amount Value Fair Value December 31, 2000 -------- -------- ---------- (Dollars in millions) Assets: Fixed maturities............................. $112,445 $112,445 Equity securities............................ 2,193 2,193 Mortgage loans on real estate................ 21,951 22,847 Policy loans................................. 8,158 8,914 Short-term investments....................... 930 930 Cash and cash equivalents.................... 3,419 3,419 Mortgage loan commitments.................... $534 -- 17 Liabilities: Policyholder account balances................ 43,196 42,958 Short-term debt.............................. 1,094 1,094 Long-term debt............................... 3,443 3,343 Payable under securities loaned transactions. 12,301 12,301 Other: Company-obligated mandatorily redeemable securities of subsidiary trust.............. 118 118 Notional Carrying Estimated Amount Value Fair Value December 31, 1999 -------- -------- ---------- (Dollars in millions) Assets: Fixed maturities............................. $ 96,981 $ 96,981 Equity securities............................ 2,006 2,006 Mortgage loans on real estate................ 19,739 19,452 Policy loans................................. 5,598 5,618 Short-term investments....................... 3,055 3,055 Cash and cash equivalents.................... 2,789 2,789 Mortgage loan commitments.................... $465 -- (7) Liabilities: Policyholder account balances................ 37,170 36,893 Short-term debt.............................. 4,208 4,208 Long-term debt............................... 2,514 2,466 Payable under securities loaned transactions. 6,461 6,461
F-23 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: Fixed Maturities and Equity Securities The fair value of fixed maturities and equity securities are based upon quotations published by applicable stock exchanges or received from other reliable sources. For securities in which the market values were not readily available, fair values were estimated using quoted market prices of comparable investments. Mortgage Loans on Real Estate and Mortgage Loan Commitments Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments, the estimated fair value is the net premium or discount of the commitments. Policy Loans Fair values for policy loans are estimated by discounting expected future cash flows using U.S. Treasury rates to approximate interest rates and the Company's past experiences to project patterns of loan accrual and repayment characteristics. Cash and Cash Equivalents and Short-term Investments The carrying values for cash and cash equivalents and short-term investments approximated fair market values due to the short-term maturities of these instruments. Policyholder Account Balances The fair value of policyholder account balances are estimated by discounting expected future cash flows, based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. Short-term and Long-term Debt, Payables Under Securities Loaned Transactions and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trust The fair values of short-term and long-term debt, payables under securities loaned transactions and Company-obligated mandatorily redeemable securities of subsidiary trust are determined by discounting expected future cash flows, using risk rates currently available for debt with similar terms and remaining maturities. Derivative Instruments The fair value of derivative instruments, including financial futures, financial forwards, interest rate and foreign currency swaps, floors, foreign exchange contracts, caps and options are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures. 5.Employee Benefit Plans Pension Benefit and Other Benefit Plans The Company is both the sponsor and administrator of defined benefit pension plans covering all eligible employees and sales representatives of Metropolitan Life and certain of its subsidiaries. Retirement benefits are based upon years of credited service and final average earnings history. The Company also provides certain postemployment benefits and certain postretirement health care and life insurance benefits for retired employees through insurance contracts. Substantially all of the Company's employees may, in accordance with the plans applicable to the postretirement benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company. F-24 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, ------------------------------ Pension Other Benefits Benefits -------------- -------------- 2000 1999 2000 1999 ------ ------ ------ ------ (Dollars in millions) Change in projected benefit obligation: Projected benefit obligation at beginning of year........................................ $3,737 $3,920 $1,483 $1,708 Service cost............................... 98 100 29 28 Interest cost.............................. 291 271 113 107 Acquisitions............................... 107 -- 37 -- Actuarial losses (gains)................... 176 (260) 59 (281) Curtailments and terminations.............. (3) (22) 2 10 Change in benefits......................... (2) -- (86) -- Benefits paid.............................. (259) (272) (95) (89) ------ ------ ------ ------ Projected benefit obligation at end of year.... 4,145 3,737 1,542 1,483 ------ ------ ------ ------ Change in plan assets: Contract value of plan assets at beginning of year........................................ 4,726 4,403 1,199 1,123 Actual return on plan assets............... 54 575 179 141 Acquisitions............................... 79 -- -- -- Employer contribution...................... 19 20 3 24 Benefits paid.............................. (259) (272) (63) (89) ------ ------ ------ ------ Contract value of plan assets at end of year... 4,619 4,726 1,318 1,199 ------ ------ ------ ------ Over (under) funded............................ 474 989 (224) (284) Unrecognized net asset at transition........... (31) (66) -- -- Unrecognized net actuarial losses (gains)...... 2 (564) (478) (487) Unrecognized prior service cost................ 109 127 (89) (2) ------ ------ ------ ------ Prepaid (accrued) benefit cost................. $ 554 $ 486 $ (791) $ (773) ------ ------ ------ ------ Qualified plan prepaid pension cost............ $ 775 $ 632 Non-qualified plan accrued pension cost........ (263) (182) Unamortized prior service cost................. 14 17 Accumulated other comprehensive income......... 28 19 ------ ------ Prepaid benefit cost........................... $ 554 $ 486 ====== ======
The aggregate projected benefit obligation and aggregate contract value of plan assets for the pension plans were as follows:
Non-Qualified Qualified Plan Plan Total ---------------- -------------- ---------------- 2000 1999 2000 1999 2000 1999 ------- ------- ------ ------ ------- ------- (Dollars in millions) Aggregate projected benefit obligation................ $(3,775) $(3,482) $ (370) $ (255) $(4,145) $(3,737) Aggregate contract value of plan assets (principally Company contracts)........ 4,619 4,726 -- -- 4,619 4,726 ------- ------- ------ ------ ------- ------- Over (under) funded........ $ 844 $ 1,244 $ (370) $ (255) $ 474 $ 989 ======= ======= ====== ====== ======= =======
The assumptions used in determining the aggregate projected benefit obligation and aggregate contract value for the pension and other benefits were as follows:
Pension Benefits Other Benefits --------------------- --------------- 2000 1999 2000 1999 --------- ---------- ------ ------- Weighted average assumptions at December 31: Discount rate....................... 6.9%-7.75% 6.25%-7.75% 6%-7.5% 6%-7.75% Expected rate of return on plan assets............................. 8%-9% 8%-10.5% 6%-9% 6%-9% Rate of compensation increase....... 4%-6% 4.5%-8.5% N/A N/A
F-25 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The assumed health care cost trend rates used in measuring the accumulated nonpension postretirement benefit obligation were 6.5% per year for pre- Medicare eligible claims and 6% for Medicare eligible claims in 2000 and 1999. Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One Percent One Percent Increase Decrease ----------- ----------- (Dollars in millions) Effect on total of service and interest cost components........................................ $ 16 $ 13 Effect of accumulated postretirement benefit obligation........................................ $143 $118
The components of periodic benefit costs were as follows:
Pension Benefits Other Benefits ------------------- ---------------- 2000 1999 1998 2000 1999 1998 ----- ----- ----- ---- ---- ---- (Dollars in millions) Service cost......................... $ 98 $ 100 $ 90 $ 29 $ 28 $ 31 Interest cost........................ 291 271 257 113 107 114 Expected return on plan assets....... (420) (363) (337) (97) (89) (79) Amortization of prior actuarial gains............................... (19) (6) (11) (22) (11) (13) Curtailment (credit) cost............ (3) (17) (10) 2 10 4 ----- ----- ----- ---- ---- ---- Net periodic benefit (credit) cost... $ (53) $ (15) $ (11) $ 25 $ 45 $ 57 ===== ===== ===== ==== ==== ====
Savings and Investment Plans The Company sponsors savings and investment plans for substantially all employees under which the Company matches a portion of employee contributions. The Company contributed $65 million, $45 million and $43 million for the years ended December 31, 2000, 1999 and 1998, respectively. 6.Closed Block On the date of demutualization, Metropolitan Life established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life. Assets have been allocated to the closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years. The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the date of demutualization. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. F-26 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Earnings of the closed block are recognized in income over the period the policies and contracts in the closed block remain in force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block is greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block is less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings. Amounts reported at April 7, 2000 and for the period after demutualization are as of April 1, 2000 and for the period beginning on April 1, 2000 (the effect of transaction from April 1, 2000 through April 6, 2000 are not considered material). Closed block liabilities and assets designated to the closed block at December 31, 2000 and April 7, 2000 were as follows:
April December 31, 7, ------------ ------- 2000 2000 ------------ ------- (Dollars in millions) Closed Block Liabilities Future policy benefits................................ $39,415 $38,661 Other policyholder funds.............................. 278 321 Policyholder dividends payable........................ 740 747 Policyholder dividend obligation...................... 385 -- Payable under securities loaned transactions.......... 3,268 1,856 Other................................................. 37 330 ------- ------- Total closed block liabilities.................... 44,123 41,915 ------- ------- Assets Designated To The Closed Block Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $25,660 and $24,725).............. 25,634 23,940 Equity securities, at fair value (cost: $51)........ 54 -- Mortgage loans on real estate....................... 5,801 4,744 Policy loans........................................ 3,826 3,762 Short-term investments.............................. 223 168 Other invested assets............................... 248 325 ------- ------- Total investments................................. 35,786 32,939 Cash and cash equivalents............................. 661 655 Accrued investment income............................. 557 538 Deferred income taxes................................. 1,234 1,390 Premiums and other receivables........................ 117 267 ------- ------- Total assets designated to the closed block....... 38,355 35,789 ------- ------- Excess of closed block liabilities over assets designated to the closed block....................... 5,768 6,126 ------- ------- Amounts included in other comprehensive loss: Net unrealized investment loss, net of deferred income tax of $9 and $287..................................... (14) (498) Allocated to policyholder dividend obligation, net of deferred income tax of $143........................ (242) -- ------- ------- (256) (498) ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities......................... $ 5,512 $ 5,628 ======= =======
F-27 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Information regarding the policyholder dividend obligation is as follows:
(Dollars in millions) --------------------- Balance at April 7, 2000................... $-- Change in policyholder dividend obligation.... 85 Net investment losses... (85) Net unrealized investment gains at December 31, 2000...... 385 ---- Balance at December 31, 2000................... $385 ====
Closed block revenues and expenses were as follows:
April 7, 2000 through December 31, 2000 --------------------- (Dollars in millions) REVENUES Premiums.............................................. $2,900 Net investment income................................. 1,949 Net investment losses (net of amounts allocable to the policyholder dividend obligation of $(85))........... (150) ------ Total revenues...................................... 4,699 ------ EXPENSES Policyholder benefits and claims...................... 2,874 Policyholder dividends................................ 1,132 Change in policyholder dividend obligation (includes amounts directly related to net investment losses of $(85))............................................... 85 Other expenses........................................ 425 ------ Total expenses...................................... 4,516 ------ Revenues net of expenses before income taxes.......... 183 Income taxes.......................................... 67 ------ Revenues net of expenses and income taxes............. $ 116 ======
The change in maximum future earnings of the closed block was as follows:
(Dollars in millions) April 7, 2000.......................................... $5,628 December 31, 2000...................................... 5,512 ------ Change during the period............................... $ (116) ======
The Company charges the closed block with federal income taxes, state and local premium taxes, and other additive state or local taxes, as well as investment management expenses relating to the closed block as provided in the plan of reorganization. The Company also charges the closed block for expenses of maintaining the policies included in the closed block. 7.Separate Accounts Separate accounts reflect two categories of risk assumption: non-guaranteed separate accounts totaling $53,656 million and $47,618 million at December 31, 2000 and 1999, respectively, for which the policyholder assumes the investment risk, and guaranteed separate accounts totaling $16,594 million and $17,323 million at December 31, 2000 and 1999, respectively, for which the Company contractually guarantees either a minimum return or account value to the policyholder. F-28 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $667 million, $485 million and $413 million for the years ended December 31, 2000, 1999 and 1998, respectively. Guaranteed separate accounts consisted primarily of Met Managed Guaranteed Interest Contracts and participating close out contracts. The average interest rates credited on these contracts were 6.9% and 6.5% at December 31, 2000 and 1999, respectively. The assets that support these liabilities were comprised of $15,708 million and $16,874 million in fixed maturities at December 31, 2000 and 1999, respectively. The portfolios are segregated from other investments and are managed to minimize liquidity and interest rate risk. In order to minimize the risk of disintermediation associated with early withdrawals, these investment products carry a graded surrender charge as well as a market value adjustment. 8.Debt Debt consisted of the following:
December 31, --------------------- 2000 1999 ---------- ---------- (Dollars in millions) Surplus notes, interest rates ranging from 6.30% to 7.80%, maturity dates ranging from 2003 to 2025.... $ 1,650 $ 1,546 Capital note, interest at 8.00%, due 2005........... 1,006 -- Investment related exchangeable debt, interest rates ranging from 4.90% to 5.40%, due 2001 and 2002..... 271 369 Fixed rate notes, interest rates ranging from 5.29% to 10.50%, maturity dates ranging from 2001 to 2009............................................... 316 187 Senior notes, interest rates ranging from 7.06% to 7.25%, maturity dates ranging from 2003 to 2007.... 98 270 Capital lease obligations........................... 42 44 Other notes with varying interest rates............. 60 98 ---------- ---------- Total long-term debt................................ 3,443 2,514 Total short-term debt............................... 1,094 4,208 ---------- ---------- Total............................................. $ 4,537 $ 6,722 ========== ==========
Metropolitan Life and certain of its subsidiaries maintain committed and unsecured credit facilities aggregating $2,000 million (five-year facility of $1,000 million expiring in April 2003 and a 364-day facility of $1,000 million expiring in April of 2001). Both facilities bear interest at LIBOR plus 20 basis points. The facilities can be used for general corporate purposes and also provide backup for the Company's commercial paper program. At December 31, 2000, there were no outstanding borrowings under either of the facilities. Reinsurance Group of America, Incorporated ("RGA"), a subsidiary of the Company, maintains committed and unsecured credit facilities aggregating $178 million (two three-year facilities of $140 million and $22 million expiring May 2003 and a three month $16 million revolving line of credit). The interest on borrowing is based on the terms of each specific borrowing. At December 31, 2000, there was $98 million outstanding under these facilities. Subsequent to December 31, 2000, RGA amended its revolving line of credit agreement into a $20 million facility. Payments of interest and principal on the surplus notes, subordinated to all other indebtedness, may be made only with the prior approval of the insurance department of the state of domicile. Subject to the prior approval of the Superintendent, the $300 million 7.45% surplus notes due 2023 may be redeemed, in whole or in part, at the election of Metropolitan Life at any time on or after November 1, 2003. Each issue of investment related debt is payable in cash or by delivery of an underlying security owned by the Company. The amount payable at maturity of the debt is greater than the principal of the debt if the market value of the underlying security appreciates above certain levels at the date of debt repayment as compared to the market value of the underlying security at the date of debt issuance. At December 31, 2000, the underlying securities pledged as collateral has a market value of $295 million. F-29 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In connection with the demutualization, Metropolitan Life issued to the Holding Company a mandatorily convertible note bearing interest at an annual rate of 8.00% of the principal amount of $1,006 million, payable quarterly in arrears commencing August 15, 2000 and maturing on May 15, 2005. The principal amount of the capital note is mandatorily convertible into common stock of Metropolitan Life upon maturity or acceleration of the capital note and without any further action by the Holding Company or Metropolitan Life. In addition, the capital note provides that Metropolitan Life may not make any payment of principal or interest on the capital note so long as specified payment restrictions exist and have not been waived by the Superintendent. Payment restrictions would exist if Metropolitan Life fails to exceed certain thresholds relative to the level of its statutory risk-based capital or the amount of its outstanding capital notes, surplus notes or similar obligations. At December 31, 2000, Metropolitan Life's statutory total adjusted capital exceeded these limitations. The aggregate maturities of long-term debt for the Company are $172 million in 2001, $210 million in 2002, $500 million in 2003, $14 million in 2004, $1,398 million in 2005 and $1,149 million thereafter. Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 6.60% and 6.05% and a weighted average maturity of 44 and 74 days at December 31, 2000 and 1999, respectively. Interest expense related to the Company's indebtedness was $417 million, $384 million and $333 million for the years ended December 31, 2000, 1999 and 1998, respectively. 9.Company-obligated Mandatorily Redeemable Securities Of Subsidiary Trust In June 1997, GenAmerica Corporation ("GenAmerica") issued $125 million of 8.525% capital securities through a wholly-owned subsidiary trust, GenAmerica Capital I. GenAmerica has fully and unconditionally guaranteed, on a subordinated basis, the obligation of the trust under the capital securities and is obligated to mandatorily redeem the securities on June 30, 2027. GenAmerica may prepay the securities any time after June 30, 2007. Capital securities outstanding at December 31, 2000 were $118 million, net of unamortized discount of $7 million. 10.Commitments And Contingencies Litigation Metropolitan Life is currently a defendant in approximately 500 lawsuits raising allegations of improper marketing and sales of individual life insurance policies or annuities. These lawsuits are generally referred to as "sales practices claims." On December 28, 1999, after a fairness hearing, the United States District Court for the Western District of Pennsylvania approved a class action settlement resolving a multidistrict litigation proceeding involving alleged sales practices claims. No appeal was taken, and the settlement is final. The settlement class includes most of the owners of permanent life insurance policies and annuity contracts or certificates issued pursuant to individual sales in the United States by Metropolitan Life, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life Insurance Company between January 1, 1982 and December 31, 1997. The class includes owners of approximately six million in-force or terminated insurance policies and approximately one million in-force or terminated annuity contracts or certificates. In addition to dismissing the consolidated class actions, the District Court's order also bars sales practices claims by class members with respect to policies or annuities issued by the defendant insurers during the class period, effectively resolving all pending sales practices class actions against these insurers in the United States. Under the terms of the order, only those class members who excluded themselves from the settlement may continue an existing, or start a new, sales practices lawsuit against Metropolitan Life, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life Insurance Company for policies or annuities issued during the class period. Approximately 20,000 class members elected to exclude themselves from the settlement. At December 31, 2000, approximately 300 of these "opt-outs" have filed new individual lawsuits. F-30 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The settlement provides three forms of relief. General relief, in the form of free death benefits, is provided automatically to class members who did not exclude themselves from the settlement or who did not elect the claim evaluation procedures set forth in the settlement. The claim evaluation procedures permit a class member to have a claim evaluated by a third party under procedures set forth in the settlement. Claim awards made under the claim evaluation procedures will be in the form of policy adjustments, free death benefits or, in some instances, cash payments. In addition, class members who have or had an ownership interest in specified policies will also automatically receive deferred acquisition cost tax relief in the form of free death benefits. The settlement fixes the aggregate amounts that are available under each form of relief. Implementation of the class action settlement is proceeding. Metropolitan Life expects that the total cost of the settlement will be approximately $957 million. This amount is equal to the amount of the increase in liabilities for the death benefits and policy adjustments and the present value of expected cash payments to be provided to included class members, as well as attorneys' fees and expenses and estimated other administrative costs, but does not include the cost of litigation with policyholders who are excluded from the settlement. The Company believes that the cost of the settlement will be substantially covered by available reinsurance and the provisions made in the consolidated financial statements, and thus will not have a material adverse effect on its business, results of operations or financial position. Metropolitan Life made some recoveries in 2000 under those reinsurance agreements and, although there is no assurance that other reinsurance claim submissions will be paid, Metropolitan Life believes payment is likely to occur. The Company believes it has made adequate provision in the consolidated financial statements for all probable losses for sales practices claims, including litigation costs involving policyholders who are excluded from the settlement as well as for the two class action settlements described in the two paragraphs immediately following the next paragraph. The Metropolitan Life class action settlement did not resolve two putative class actions involving sales practices claims filed against Metropolitan Life in Canada. A certified class action with conditionally certified subclasses is pending in the United States District Court for the Southern District of New York against Metropolitan Life, Metropolitan Insurance and Annuity Company, Metropolitan Tower Life Insurance Company and various individual defendants alleging improper sales abroad; settlement discussions are continuing. Separate from the Metropolitan Life class action settlement, similar sales practices class action litigation against New England Mutual Life Insurance Company ("New England Mutual"), with which Metropolitan Life merged in 1996, and General American, which was acquired in 2000, has been settled. The New England Mutual case, a consolidated multidistrict litigation in the United States District Court for the District of Massachusetts, involves approximately 600,000 life insurance policies sold during the period January 1, 1983 through August 31, 1996. The settlement of this case was approved by the District Court in October 2000 and is not being appealed. Implementation of the class action settlement is proceeding. The Company expects that the total cost of this settlement will be approximately $150 million. Approximately 2,400 class members opted-out of the settlement. As of December 31, 2000, New England Mutual was a defendant in approximately 30 opt-out lawsuits involving sales practices claims. The settlement of the consolidated multidistrict sales practices class action case against General American was approved by the United States District Court for the Eastern District of Missouri. The General American case involves approximately 250,000 life insurance policies sold during the period January 1, 1982 through December 31, 1996. One appeal has been filed. The Company expects that the approximate cost of the settlement will be $55 million, not including legal fees and costs for plaintiffs' counsel. The District Court has scheduled a hearing in March 2001 with respect to plaintiffs' class counsels' request for such fees and costs. Approximately 700 class members have elected to exclude themselves from the General American settlement. As of December 31, 2000, General American was a defendant in approximately ten opt-out lawsuits involving sales practices claims. In the past, some individual sales practices claims have been resolved through settlement, have been won by dispositive motions, or, in a few instances, have gone to trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance may be commenced in the future. F-31 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Regulatory authorities in a small number of states have had investigations or inquiries relating to Metropolitan Life's, New England Mutual's or General American's sales of individual life insurance policies or annuities. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief. The Company may continue to resolve investigations in a similar manner. Metropolitan Life is also a defendant in numerous lawsuits seeking compensatory and punitive damages for personal injuries allegedly caused by exposure to asbestos or asbestos-containing products. Metropolitan Life has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. Rather, these lawsuits, currently numbering in the thousands, have principally been based upon allegations relating to certain research, publication and other activities of one or more of Metropolitan Life's employees during the period from the 1920's through approximately the 1950's and alleging that Metropolitan Life learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Legal theories asserted against Metropolitan Life have included negligence, intentional tort claims and conspiracy claims concerning the health risks associated with asbestos. While Metropolitan Life believes it has meritorious defenses to these claims, and has not suffered any adverse judgments in respect of these claims, most of the cases have been resolved by settlements. Metropolitan Life intends to continue to exercise its best judgment regarding settlement or defense of such cases, including when trials of these cases are appropriate. The number of such cases that may be brought or the aggregate amount of any liability that Metropolitan Life may ultimately incur is uncertain. Significant portions of amounts paid in settlement of such cases have been funded with proceeds from a previously-resolved dispute with Metropolitan Life's primary, umbrella and first level excess liability insurance carriers. Metropolitan Life was involved in litigation with several of its excess liability insurers regarding amounts payable under its policies with respect to coverage for these claims. The trial court granted summary judgment to these insurers and Metropolitan Life appealed. The Connecticut Supreme Court in 2001 affirmed the decision of the trial court. The Company believes that Metropolitan Life's asbestos-related litigation with these insurers should have no effect on its recoveries under excess insurance policies that were obtained in 1998 for asbestos-related claims. The Company has recorded, in other expenses, charges of $15 million ($10 million after-tax), $499 million ($317 million after-tax), and $1,895 million ($1,203 million after-tax) for the years ended December 31, 2000, 1999, and 1998, respectively, for sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products. The 2000 charge was principally related to sales practices claims. The 1999 charge was principally related to the settlement of the multidistrict litigation proceeding involving alleged improper sales practices, accruals for sales practices claims not covered by the settlement and other legal costs. The 1998 charge was comprised of $925 million and $970 million for sales practices claims and asbestos-related claims, respectively. The Company recorded the charges for sales practices claims in 1998 based on preliminary settlement discussions and the settlement history of other insurers. Prior to the fourth quarter of 1998, Metropolitan Life established a liability for asbestos-related claims based on settlement costs for claims that Metropolitan Life had settled, estimates of settlement costs for claims pending against Metropolitan Life and an estimate of settlement costs for unasserted claims. The amount for unasserted claims was based on management's estimate of unasserted claims that would be probable of assertion. A liability is not established for claims which management believes are only reasonably possible of assertion. Based on this process, the accrual for asbestos-related claims at December 31, 1997 was $386 million. Potential liabilities for asbestos-related claims are not easily quantified, due to the nature of the allegations against Metropolitan Life, which are not related to the business of manufacturing, producing, distributing or selling asbestos or asbestos- containing products, adding to the uncertainty as to the number of claims that may be brought against Metropolitan Life. During 1998, Metropolitan Life decided to pursue the purchase of excess insurance to limit its exposure to asbestos-related claims. In connection with the negotiations with the casualty insurers to obtain this insurance, Metropolitan Life obtained information that caused management to reassess the accruals for asbestos-related claims. This information included: . Information from the insurers regarding the asbestos-related claims experience of other insureds, which indicated that the number of claims that were probable of assertion against Metropolitan Life in the future F-32 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) was significantly greater than it had assumed in its accruals. The number of claims brought against Metropolitan Life is generally a reflection of the number of asbestos-related claims brought against asbestos defendants generally and the percentage of those claims in which Metropolitan Life is included as a defendant. The information provided to Metropolitan Life relating to other insureds indicated that Metropolitan Life had been included as a defendant for a significant percentage of total asbestos-related claims and that it may be included in a larger percentage of claims in the future, because of greater awareness of asbestos litigation generally by potential plaintiffs and plaintiffs' lawyers and because of the bankruptcy and reorganization or the exhaustion of insurance coverage of other asbestos defendants; and that, although volatile, there was an upward trend in the number of total claims brought against asbestos defendants. . Information derived from actuarial calculations Metropolitan Life made in the fourth quarter of 1998 in connection with these negotiations, which helped to frame, define and quantify this liability. These calculations were made using, among other things, current information regarding Metropolitan Life's claims and settlement experience (which reflected Metropolitan Life's decision to resolve an increased number of these claims by settlement), recent and historic claims and settlement experience of selected other companies and information obtained from the insurers. Based on this information, Metropolitan Life concluded that certain claims that previously were considered as only reasonably possible of assertion were probable of assertion, increasing the number of assumed claims to approximately three times the number assumed in prior periods. As a result of this reassessment, Metropolitan Life increased its liability for asbestos- related claims to $1,278 million at December 31, 1998. During 1998, Metropolitan Life paid $1,407 million of premiums for excess of loss reinsurance agreements and excess insurance policies, consisting of $529 million for the excess of loss reinsurance agreements for sales practices claims and excess mortality losses and $878 million for the excess insurance policies for asbestos-related claims. Metropolitan Life obtained the excess of loss reinsurance agreements to provide reinsurance with respect to sales practices claims made on or prior to December 31, 1999 and for certain mortality losses in 1999. These reinsurance agreements have a maximum aggregate limit of $650 million, with a maximum sublimit of $550 million for losses for sales practices claims. This coverage is in excess of an aggregate self-insured retention of $385 million with respect to sales practices claims and $506 million, plus Metropolitan Life's statutory policy reserves released upon the death of insureds, with respect to life mortality losses. At December 31, 1999, the subject losses under the reinsurance agreements due to sales practices claims and related counsel fees from the time Metropolitan Life entered into the reinsurance agreements did not exceed that self-insured retention. No recoveries were made with respect to the coverage for excess mortality losses for 1999. As noted above, recoveries have been made in 2000 under the reinsurance agreements for the sales practices claims. The maximum sublimit of $550 million for sales practices claims was within a range of losses that management believed were reasonably possible at December 31, 1998. Each excess of loss reinsurance agreement for sales practices claims and mortality losses contains an experience fund, which provides for payments to Metropolitan Life at the commutation date if experience is favorable at such date. The Company accounts for the aggregate excess of loss reinsurance agreements as reinsurance; however, if deposit accounting were applied, the effect on the Company's consolidated financial statements in 2000, 1999 and 1998 would not be significant. Under reinsurance accounting, the excess of the liability recorded for sales practices losses recoverable under the agreements of $550 million over the premium paid of $529 million resulted in a deferred gain of $21 million which was amortized into income over the settlement period from January 1999 through April 2000. Under deposit accounting, the premium would be recorded as an other asset rather than as an expense, and the reinsurance loss recoverable and the deferred gain would not have been recorded. Because the agreements also contain an experience fund which increases with the passage of time, the increase in the experience fund in 1999 and 2000 under deposit accounting would be recognized as interest income in an amount approximately equal to the deferred gain that was amortized into income under reinsurance accounting. The excess insurance policies for asbestos-related claims provide for recovery of losses up to $1,500 million, which is in excess of a $400 million self-insured retention ($878 million of which was recorded as a recoverable at F-33 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 2000, 1999 and 1998). The asbestos-related policies are also subject to annual and per-claim sublimits. Amounts are recoverable under the policies annually with respect to claims paid during the prior calendar year. Although amounts paid in any given year that are recoverable under the policies will be reflected as a reduction in the Company's operating cash flows for that year, management believes that the payments will not have a material adverse effect on the Company's liquidity. Each asbestos-related policy contains an experience fund and a reference fund that provides for payments to the Company at the commutation date if experience under the policy to such date has been favorable, or pro rata reductions from time to time in the loss reimbursements to the Company if the cumulative return on the reference fund is less than the return specified in the experience fund. The Company believes adequate provision has been made in its consolidated financial statements for all reasonably probable and estimable losses for sales practices and asbestos-related claims. With respect to Metropolitan Life's asbestos litigation, estimates can be uncertain due to the limitations of available data and the difficulty of predicting with any certainty numerous variables that can affect liability estimates, including the number of future claims, the cost to settle claims and the impact of any possible future adverse verdicts and their amounts. Recent bankruptcies of other companies involved in asbestos litigation may result in an increase in the number of claims and the cost of resolving claims, as well as the number of trials and possible verdicts Metropolitan Life may experience. Plaintiffs are seeking additional funds from defendants, including Metropolitan Life, in light of recent bankruptcy filings by certain other defendants. Accordingly, it is reasonably possible that the Company's total exposure to asbestos claims may be greater than the liability recorded by the Company in its consolidated financial statements. Metropolitan Life will continue to study the variables in light of additional information, including legislative and judicial developments, gained over time in order to identify trends that may become evident and to assess their impact on the previously established liability; future charges to income may be necessary. While the potential future charges could be material in particular quarterly or annual periods in which they are recorded, based on information currently known by management, it does not believe any such charges are likely to have a material adverse effect on the Company's consolidated financial position. A purported class action suit involving policyholders in four states has been filed in a Rhode Island state court against a Metropolitan Life subsidiary, Metropolitan Property and Casualty Insurance Company, with respect to claims by policyholders for the alleged diminished value of automobiles after accident-related repairs. The trial court recently denied a motion by Metropolitan Property and Casualty Insurance Company for summary judgment, and discovery has commenced. A class certification motion has been denied. Similar "diminished value" purported class action suits have been filed in Texas and Tennessee against Metropolitan Property and Casualty Insurance Company. A purported class action has been filed against Metropolitan Property and Casualty Insurance Company's subsidiary, Metropolitan Casualty Insurance Company, in Florida by a policyholder alleging breach of contract and unfair trade practices with respect to allowing the use of parts not made by the original manufacturer to repair damaged automobiles. A motion for class certification is pending. In addition, a plaintiff in Louisiana state court recently amended an individual lawsuit to state a putative class action on behalf of Louisiana insureds challenging the method that Metropolitan Property and Casualty Insurance Company uses to determine the value of a motor vehicle that has sustained a total loss. A class certification motion is pending. These suits are in the early stages of litigation and Metropolitan Property and Casualty Insurance Company and Metropolitan Casualty Insurance Company intend to defend themselves vigorously against these suits. Similar suits have been filed against many other personal lines property and casualty insurers. The United States, the Commonwealth of Puerto Rico and various hotels and individuals have sued MetLife Capital Corporation, a former subsidiary of the Company, seeking damages for clean up costs, natural resource damages, personal injuries and lost profits and taxes based upon, among other things, a release of oil from a barge which was being towed by the M/V Emily S. In connection with the sale of MetLife Capital, the Company acquired MetLife Capital's potential liability with respect to the M/V Emily S. lawsuits. MetLife Capital had entered into a sale and leaseback financing arrangement with respect to the M/V Emily S. The plaintiffs have taken the position that MetLife Capital, as the owner of record of the M/V Emily S., is responsible for all damages caused by the barge, including the oil spill. The claims of the governments of the United States and Puerto Rico were settled in 2000 within amounts previously accrued by the Company. F-34 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Metropolitan Life has completed a tender offer to purchase the shares of Conning Corporation that it had not already owned. After Metropolitan Life had announced its intention to make a tender offer, three putative class actions were filed by Conning shareholders alleging that the prospective offer was inadequate and constituted a breach of fiduciary duty. The parties to the litigation have reached an agreement providing for a settlement of the actions; a motion seeking court approval for the settlement will be filed with the New York State Supreme Court in New York County after a final agreement is signed. Several lawsuits were brought in 2000 challenging the fairness of Metropolitan Life's plan of reorganization and the adequacy and accuracy of Metropolitan Life's disclosure to policyholders regarding the plan. These actions name as defendants some or all of Metropolitan Life, the Holding Company, the individual directors, the New York Superintendent of Insurance and the underwriters for MetLife, Inc.'s initial public offering, Goldman Sachs & Company and Credit Suisse First Boston. Five purported class actions pending in the Supreme Court of the State of New York for New York County have been consolidated within the commercial part. In addition, there remains a separate purported class action in New York state court in New York County and another in Kings County. The plaintiffs in the state court class actions seek injunctive, declaratory and compensatory relief, as well as an accounting. Some of the plaintiffs in the above described actions have also brought a proceeding under Article 78 of New York's Civil Practice Law and Rules challenging the Opinion and Decision of the New York Superintendent of Insurance that approved the plan. In this proceeding, petitioners seek to vacate the Superintendent's Opinion and Decision and enjoin him from granting final approval of the plan. Another purported class action is pending in the Supreme Court of the State of New York for New York County and has been brought on behalf of a purported class of beneficiaries of Metropolitan Life annuities purchased to fund structured settlements claiming that the class members should have received common stock or cash in connection with the demutualization. Three purported class actions were filed in the United States District Court for the Eastern District of New York claiming violation of the Securities Act of 1933. The plaintiffs in these actions, which have been consolidated, claim that the Policyholder Information Booklets relating to the plan failed to disclose certain material facts and seek rescission and compensatory damages. A purported class action was filed in the United States District Court for the Southern District of New York seeking damages from Metropolitan Life and the Holding Company for alleged violations of various provisions of the Constitution of the United States in connection with the plan of reorganization. Metropolitan Life, the Holding Company and the individual defendants believe they have meritorious defenses to the plaintiffs' claims and are contesting vigorously all of the plaintiffs' claims in these actions. The defendants have moved to dismiss most of these actions; the Kings County action and the Article 78 proceeding are being voluntarily held in abeyance. Three lawsuits were also filed against Metropolitan Life in 2000 in the United States District Courts for the Southern District of New York, for the Eastern District of Louisiana, and for the District of Kansas, alleging racial discrimination in the marketing, sale, and administration of life insurance policies, including "industrial" life insurance policies, sold by Metropolitan Life decades ago. The plaintiffs in these three purported class actions seek unspecified compensatory damages, punitive damages, reformation, imposition of a constructive trust, a declaration that the alleged practices are discriminatory and illegal, injunctive relief requiring Metropolitan Life to discontinue the alleged discriminatory practices and adjust policy values, and other relief. Metropolitan Life believes it has meritorious defenses to the plaintiffs' claims and is contesting vigorously plaintiffs' claims in these actions. Metropolitan Life has successfully transferred the Louisiana action to the United States District Court for the Southern District of New York and has also filed a motion to transfer the Kansas action to the same court. Metropolitan Life has moved for summary judgment in the two actions pending in New York, citing the applicable statute of limitations. The New York cases are scheduled for trial in November 2001. Insurance departments in a number of states have initiated inquiries in 2000 about possible race-based underwriting of life insurance. These inquiries generally have been directed to all life insurers licensed in the respective states, including Metropolitan Life and certain of its subsidiaries. The New York Insurance Department has commenced examinations of certain domestic life insurance companies, including Metropolitan Life and certain of its subsidiaries, concerning possible past race-based underwriting practices. Various litigation, claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's F-35 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other Federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. It is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses. In some of the matters referred to above, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have a material adverse effect on the Company's consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's operating results or cash flows in particular quarterly or annual periods. Leases In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants is contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment. Future minimum rental and subrental income, and minimum gross rental payments relating to these lease agreements were as follows:
Gross Rental Sublease Rental Income Income Payments ------ -------- -------- (Dollars in millions) 2001................................................ $ 881 $17 $145 2002................................................ 679 15 114 2003................................................ 631 12 93 2004................................................ 574 11 76 2005................................................ 538 11 61 Thereafter.......................................... 2,322 21 264
Commitments to Fund Partnership Investments The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $1,311 million and $1,131 million at December 31, 2000 and 1999, respectively. The Company anticipates that these amounts will be invested in the partnerships over the next three to five years. 11.Acquisitions and Dispositions Acquisitions On January 6, 2000, Metropolitan Life completed its acquisition of GenAmerica for $1.2 billion. As part of the GenAmerica acquisition, General American Life Insurance Company paid Metropolitan Life a fee of $120 million in connection with the assumption of certain funding agreements. The fee has been considered as part of the purchase price of GenAmerica. GenAmerica is a holding company which includes General American Life Insurance Company, approximately 49% of the outstanding shares of RGA common stock, a provider of reinsurance, and 61% of the outstanding shares of Conning Corporation ("Conning") common stock, an asset manager. Metropolitan Life owned 10% of the outstanding shares of RGA common stock prior to the completion of the GenAmerica acquisition. At December 31, 2000 Metropolitan Life's ownership percentage of the outstanding shares of RGA common stock was approximately 59%. In April 2000, Metropolitan Life acquired the outstanding shares of Conning common stock not already owned by Metropolitan Life for $73 million. F-36 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company's total revenues and net income for the year ended December 31, 1999 on both a historical and pro forma basis as if the acquisition of GenAmerica had occurred on January 1, 1999 were as follows:
Total Revenues Net Income -------------- ---------- (Dollars in millions) Historical......................................... $25,421 $617 Pro forma (unaudited).............................. $29,278 $403
The pro forma results include adjustments to give effect to the amortization of discounts on fixed maturities, goodwill and value of business acquired, adjustments to liabilities for future policy benefits, and certain other adjustments, together with related income tax effects. The pro forma information is not necessarily indicative of the results that would have occurred had the purchase been made on January 1, 1999 or the future results of the combined operations. Dispositions During 2000, the Company completed the sale of its 48% ownership interest in its affiliates, Nvest, L.P. and Nvest Companies L.P. This transaction resulted in an investment gain of $663 million. Effective October 31, 2000, the Company sold Exeter Reassurance Company, Ltd. ("Exeter") to the Holding Company and recorded an investment loss of $27 million. During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial financing company) and a substantial portion of its Canadian and Mexican insurance operations, which resulted in an investment gain of $531 million. 12. Income Taxes The provision for income taxes was as follows:
Years ended December 31, ---------------------------- 2000 1999 1998 -------- -------- -------- (Dollars in millions) Current: Federal...................................... $ (131) $ 608 $ 666 State and local.............................. 34 24 60 Foreign...................................... 5 4 99 -------- -------- -------- (92) 636 825 -------- -------- -------- Deferred: Federal...................................... 555 (78) (25) State and local.............................. 8 2 (8) Foreign...................................... 6 (2) (54) -------- -------- -------- 569 (78) (87) -------- -------- -------- Provision for income taxes..................... $ 477 $ 558 $ 738 ======== ======== ========
F-37 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Reconciliations of the income tax provision at the U.S. statutory rate to the provision for income taxes as reported were as follows:
Years ended December 31, --------------------------- 2000 1999 1998 -------- -------- -------- (Dollars in millions) Tax provision at U.S. statutory rate............. $ 499 $ 411 $ 728 Tax effect of: Tax exempt investment income................... (52) (39) (40) Surplus tax.................................... (145) 125 18 State and local income taxes................... 30 18 31 Prior year taxes............................... (37) (31) 4 Demutualization costs.......................... 21 56 -- Payment to former Canadian policyholders....... 114 -- -- Sales of businesses............................ 31 -- (19) Other, net..................................... 16 18 16 -------- ------- ------- Provision for income taxes....................... $ 477 $ 558 $ 738 ======== ======= =======
Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
December 31, -------------- 2000 1999 ------ ------ (Dollars in millions) Deferred income tax assets: Policyholder liabilities and receivables................... $3,034 $3,042 Net operating losses....................................... 258 72 Net unrealized investment losses........................... -- 161 Employee benefits.......................................... 167 192 Litigation related......................................... 232 468 Other...................................................... 350 242 ------ ------ 4,041 4,177 Less: Valuation allowance.................................. 78 72 ------ ------ 3,963 4,105 ------ ------ Deferred income tax liabilities: Investments................................................ 1,329 1,472 Deferred policy acquisition costs.......................... 2,713 1,967 Net unrealized investment gains............................ 626 -- Other...................................................... 37 63 ------ ------ 4,705 3,502 ------ ------ Net deferred income tax (liability) asset.................... $ (742) $ 603 ====== ======
Domestic net operating loss carryforwards amount to $393 million at December 31, 2000 and expire in 2020. Foreign net operating loss carryforwards amount to $354 million at December 31, 2000 and were generated in various foreign countries with expiration periods of five years to infinity. The Company has recorded a valuation allowance related to tax benefits of certain foreign net operating loss carryforwards. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable. F-38 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Internal Revenue Service has audited the Company for the years through and including 1996. The Company is being audited for the years 1997, 1998 and 1999. The Company believes that any adjustments that might be required for open years will not have a material effect on the Company's consolidated financial statements. 13. Reinsurance The Company's life insurance operations participate in reinsurance in order to limit losses, minimize exposure to large risks and to provide additional capacity for future growth. Risks in excess of $25 million on single survivorship policies and $35 million on joint survivorship policies are 100 percent coinsured. Life reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term and coinsurance. In addition, the Company has exposure to catastrophes, which are an inherent risk of the property and casualty insurance business and could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of loss and quota share reinsurance arrangements to limit its maximum loss, provide greater diversification of risk and minimize exposure to larger risks. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. The Company is engaged in life reinsurance whereby it indemnifies another insurance company for all or a portion of the insurance risk underwritten by the ceding company. See Note 10 for information regarding certain excess of loss reinsurance agreements providing coverage for risks associated primarily with sales practices claims. The amounts in the consolidated statements of income are presented net of reinsurance ceded. The effects of reinsurance were as follows:
Years ended December 31, ------------------------- 2000 1999 1998 ------- ------- ------- (Dollars in millions) Direct premiums.................................. $15,661 $13,249 $12,763 Reinsurance assumed.............................. 2,858 484 409 Reinsurance ceded................................ (2,256) (1,645) (1,669) ------- ------- ------- Net premiums..................................... $16,263 $12,088 $11,503 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits........................... $ 1,934 $ 1,626 $ 1,744 ======= ======= =======
Reinsurance recoverables, included in premiums and other receivables, were $3,304 million and $2,898 million at December 31, 2000 and 1999, respectively, including $1,359 million and $1,372 million, respectively, relating to reinsurance of long-term guaranteed interest contracts and structured settlement lump sum contracts accounted for as a financing transaction. Reinsurance and ceded commissions payables, included in other liabilities, were $225 million and $148 million at December 31, 2000 and 1999, respectively. F-39 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following provides an analysis of the activity in the liability for benefits relating to property and casualty and group accident and non-medical health policies and contracts:
Years ended December 31, ------------------------- 2000 1999 1998 ------- ------- ------- (Dollars in millions) Balance at January 1.............................. $ 3,789 $ 3,320 $ 3,655 Reinsurance recoverables........................ (415) (382) (378) ------- ------- ------- Net balance at January 1.......................... 3,374 2,938 3,277 ------- ------- ------- Acquisition of business........................... 35 204 -- ------- ------- ------- Incurred related to: Current year.................................... 3,773 3,129 2,726 Prior years..................................... (111) (16) (245) ------- ------- ------- 3,662 3,113 2,481 ------- ------- ------- Paid related to: Current year.................................... (2,243) (2,012) (1,967) Prior years..................................... (1,023) (869) (853) ------- ------- ------- (3,266) (2,881) (2,820) ------- ------- ------- Net Balance at December 31........................ 3,805 3,374 2,938 Add: Reinsurance recoverables................... 214 415 382 ------- ------- ------- Balance at December 31............................ $ 4,019 $ 3,789 $ 3,320 ======= ======= =======
14. Other Expenses Other expenses were comprised of the following:
Years ended December 31, ------------------------- 2000 1999 1998 ------- ------- ------- (Dollars in millions) Compensation..................................... $ 2,712 $ 2,590 $ 2,478 Commissions...................................... 1,710 937 902 Interest and debt issue costs.................... 365 405 379 Amortization of policy acquisition costs (excludes amortization of $(95), $(46) and $240, respectively, related to investment (losses) gains).......................................... 1,472 930 641 Capitalization of policy acquisition costs....... (1,805) (1,160) (1,025) Rent, net of sublease income..................... 296 239 155 Minority interest................................ 115 55 67 Restructuring charge............................. -- -- 81 Other............................................ 3,269 2,759 4,341 ------- ------- ------- Total other expenses........................... $ 8,134 $ 6,755 $ 8,019 ======= ======= =======
During 1998, the Company recorded charges of $81 million to restructure headquarters operations and consolidate certain agencies and other operations. These costs were paid during 1999. 15. Stockholder's Equity Dividend Restrictions Under the New York Insurance Law, Metropolitan Life is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Holding Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus to policyholders as of the immediately preceding F-40 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) calendar year and (ii) its net gain from operations for the immediately preceding calendar year (excluding realized investment gains). Metropolitan Life will be permitted to pay a stockholder dividend to the Holding Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution. Under the New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The Department has established informal guidelines for such determinations. The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. At December 31, 2000, Metropolitan Life could pay the Holding Company a stockholder dividend of $721 million without prior approval of the Superintendent. During 2000, the Company paid an ordinary dividend of $762 million to its parent, the Holding Company. Statutory Equity and Income The reconciliations of insurance subsidiaries' statutory capital and surplus and net change in statutory capital and surplus determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities, with stockholder's equity and net income determined in conformity with generally accepted accounting principles were as follows:
December 31, ---------------- 2000 1999 ------- ------- (Dollars in millions) Statutory capital and surplus of insurance subsidiaries... $ 7,213 $ 7,630 GAAP adjustments for: Future policy benefits and policyholder account balances............................................... (3,469) (4,167) Deferred policy acquisition costs....................... 8,740 8,381 Deferred income taxes................................... (57) 886 Valuation of investments................................ 1,077 (2,102) Statutory asset valuation reserves...................... 3,344 3,189 Statutory interest maintenance reserves................. 547 1,114 Surplus notes........................................... (1,650) (1,546) Other, net.............................................. 271 305 ------- ------- Stockholder's Equity...................................... $16,016 $13,690 ======= =======
Years ended December 31, ------------------- 2000 1999 1998 ----- ---- ------ (Dollars in millions) Net change in statutory capital and surplus of insurance subsidiaries............................... $(417) $242 $ 10 GAAP adjustments for: Future policy benefits and policyholder account balances........................................... 133 556 127 Deferred policy acquisition costs................... 214 379 224 Deferred income taxes............................... (496) 154 234 Valuation of investments............................ 1,229 473 1,158 Statutory asset valuation reserves.................. 88 (226) (461) Statutory interest maintenance reserves............. (571) (368) 312 Dividends on common stock........................... 762 -- -- Other, net.......................................... 7 (593) (261) ----- ---- ------ Net income............................................ $ 949 $617 $1,343 ===== ==== ======
In March 1998, the National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles (the "Codification"). The Codification, which is intended to standardize regulatory accounting and reporting to state insurance departments, is effective January 1, 2001. However, statutory accounting F-41 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) principles will continue to be established by individual state laws and permitted practices. The Department requires adoption of the Codification, with certain modifications, for the preparation of statutory financial statements effective January 1, 2001. The Company believes that the adoption of Codification by the NAIC and the Codification as modified by the Department, as currently interpreted, will not adversely affect statutory capital and surplus as of January 1, 2001. 16. Other Comprehensive Income (Loss) The following table sets forth the reclassification adjustments required for the years ended December 31, 2000, 1999 and 1998 to avoid double-counting in other comprehensive income (loss) items that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
2000 1999 1998 ------ ------- ------ (Dollars in millions) Holding gains (losses) on investments arising during the year............................................. $2,807 $(6,314) $1,493 Income tax effect of holding gains or losses.......... (975) 2,262 (617) Reclassification adjustments: Recognized holding losses (gains) included in current year income................................ 989 38 (2,013) Amortization of premium and discount on investments. (498) (307) (350) Recognized holding (losses) gains allocated to other policyholder amounts............................... (54) (67) 608 Income tax effect................................... (152) 120 729 Allocation of holding (gains) losses on investments relating to other policyholder amounts............... (977) 3,788 (351) Income tax effect of allocation of holding gains or losses to other policyholder amounts................. 340 (1,357) 143 ------ ------- ------ Net unrealized investment gains (losses).............. 1,480 (1,837) (358) ------ ------- ------ Foreign currency translation adjustments arising during the year...................................... (6) 50 (115) Reclassification adjustment for sale of investment in foreign operation.................................... -- -- 2 ------ ------- ------ Foreign currency translation adjustment............... (6) 50 (113) ------ ------- ------ Minimum pension liability adjustment.................. (9) (7) (12) ------ ------- ------ Other comprehensive income (loss)..................... $1,465 $(1,794) $ (483) ====== ======= ======
17. Business Segment Information The Company provides insurance and financial services to customers in the United States, Canada, Central America, South America, Europe, South Africa, Asia and Australia. The Company's business is divided into six major segments: Individual Business, Institutional Business, Reinsurance, Auto & Home, Asset Management and International. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Individual Business offers a wide variety of individual insurance and investment products, including life insurance, annuities and mutual funds. Institutional Business offers a broad range of group insurance and retirement and savings products and services, including group life insurance, non-medical health insurance such as short and long-term disability, long-term care and dental insurance and other insurance products and services. Reinsurance provides life reinsurance and international life and disability on a direct and reinsurance basis. Auto & Home provides insurance coverages including private passenger automobile, homeowners and personal excess liability insurance. Asset Management provides a broad variety of asset management products and services to individuals and institutions. International provides life insurance, accident and health insurance, annuities and retirement and savings products to both individuals and groups, and auto and homeowners coverage to individuals. F-42 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Set forth in the tables below is certain financial information with respect to the Company's operating segments for the years ended December 31, 2000, 1999 and 1998. The accounting policies of the segments are the same as those described in the summary of significant accounting policies, except for the method of capital allocation. The Company allocates capital to each segment based upon an internal capital allocation system that allows the Company to more effectively manage its capital. The Company evaluates the performance of each operating segment based upon income or loss from operations before provision for income taxes and non-recurring items (e.g. items of unusual or infrequent nature). The Company allocates non-recurring items (primarily consisting of sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products and demutualization costs) and, prior to its sale in 1998, the results of MetLife Capital Holdings, Inc., to the Corporate segment.
At or for the year ended December 31, Auto & Asset Consolidation/ 2000 Individual Institutional Reinsurance Home Management International Corporate Elimination Total - ------------- ---------- ------------- ----------- ------ ---------- ------------- --------- -------------- -------- (Dollars in millions) $ Premiums........ $ 4,673 $ 6,900 $1,396 $2,636 $-- $ 660 -- $ (2) $ 16,263 Universal life and investment- type product policy fees.... 1,221 547 -- -- -- 53 -- (1) 1,820 Net investment income......... 6,475 3,959 368 194 90 254 678 (245) 11,773 Other revenues.. 838 673 29 40 760 9 150 (37) 2,462 Net investment gains (losses). 227 (475) (2) (20) -- 18 (228) 62 (418) Policyholder benefits and claims......... 5,054 8,178 1,045 2,005 -- 562 91 -- 16,935 Interest credited to policyholder account balances....... 1,680 1,090 109 -- -- 56 -- -- 2,935 Policyholder dividends...... 1,742 124 15 -- -- 32 -- -- 1,913 Payments to former Canadian policyholders.. -- -- -- -- -- 327 -- -- 327 Demutualization costs.......... -- -- -- -- -- -- 230 -- 230 Other expenses.. 3,511 1,753 506 827 784 292 687 (226) 8,134 Income (loss) before provision for income taxes... 1,447 459 116 18 66 (275) (408) 3 1,426 Net income (loss)......... 920 307 68 30 34 (285) (150) 25 949 Total assets.... 132,433 90,279 6,503 4,511 418 5,119 18,788 (3,559) 254,492 Deferred policy acquisition costs.......... 8,610 446 910 176 -- 354 1 -- 10,497 Separate account assets......... 34,860 33,918 28 -- -- 1,491 -- (47) 70,250 Policyholder liabilities.... 84,049 50,223 4,984 2,559 -- 2,435 64 (989) 143,325 Separate account liabilities.... 34,860 33,918 28 -- -- 1,491 -- (47) 70,250
F-43 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At or for the year ended December 31, Auto & Asset Consolidation/ 1999 Individual Institutional Reinsurance Home Management International Corporate Elimination Total - ------------- ---------- ------------- ----------- ------ ---------- ------------- --------- -------------- -------- (Dollars in millions) Premiums........ $ 4,289 $ 5,525 $-- $1,751 $ -- $ 523 $ -- $ -- $ 12,088 Universal life and investment- type product policy fees.... 888 502 -- -- -- 43 -- -- 1,433 Net investment income......... 5,346 3,755 -- 103 80 206 605 (279) 9,816 Other revenues.. 558 629 -- 21 803 12 59 72 2,154 Net realized investment (losses) gains. (14) (31) -- 1 -- 1 (41) 14 (70) Policyholder benefits and claims......... 4,625 6,712 -- 1,301 -- 458 -- 4 13,100 Interest credited to policyholder account balances....... 1,359 1,030 -- -- -- 52 -- -- 2,441 Policyholder dividends...... 1,509 159 -- -- -- 22 -- -- 1,690 Demutualization costs.......... -- -- -- -- -- -- 260 -- 260 Other expenses.. 2,719 1,589 -- 514 795 248 1,031 (141) 6,755 Income (loss) before provision for income taxes... 855 890 -- 61 88 5 (668) (56) 1,175 Net income (loss)......... 555 567 -- 56 51 21 (583) (50) 617 Total assets.... 109,401 88,127 -- 4,443 1,036 4,381 20,499 (2,655) 225,232 Deferred policy acquisition costs.......... 8,228 364 -- 167 -- 311 -- -- 9,070 Separate account assets......... 28,828 35,236 -- -- -- 877 -- -- 64,941 Policyholder liabilities.... 72,956 47,781 -- 2,318 -- 2,187 6 (293) 124,955 Separate account liabilities.... 28,828 35,236 -- -- -- 877 -- -- 64,941
At or for the year ended December 31, Auto & Asset Consolidation/ 1998 Individual Institutional Reinsurance Home Management International Corporate Elimination Total - ------------- ---------- ------------- ----------- ------ ---------- ------------- --------- -------------- -------- (Dollars in millions) Premiums........ $ 4,323 $ 5,159 $-- $1,403 $ -- $ 618 $ -- $ -- $ 11,503 Universal life and investment- type product policy fees.... 817 475 -- -- -- 68 -- -- 1,360 Net investment income......... 5,480 3,885 -- 81 75 343 682 (318) 10,228 Other revenues.. 474 575 -- 36 817 33 111 (52) 1,994 Net realized investment gains.......... 659 557 -- 122 -- 117 679 (113) 2,021 Policyholder benefits and claims......... 4,606 6,416 -- 1,029 -- 597 (10) -- 12,638 Interest credited to policyholder account balances....... 1,423 1,199 -- -- -- 89 -- -- 2,711 Policyholder dividends...... 1,445 142 -- -- -- 64 -- -- 1,651 Demutualization costs.......... -- -- -- -- -- -- 6 -- 6 Other expenses.. 2,577 1,613 -- 386 799 352 2,601 (309) 8,019 Income (loss) before provision for income taxes... 1,702 1,281 -- 227 93 77 (1,125) (174) 2,081 Net income (loss)......... 1,069 846 -- 161 49 56 (695) (143) 1,343 Total assets.... 103,614 88,741 -- 2,763 1,164 3,432 20,852 (5,220) 215,346 Deferred policy acquisition costs.......... 6,386 354 -- 57 -- 231 -- -- 7,028 Separate account assets......... 23,013 35,029 -- -- -- 26 -- -- 58,068 Policyholder liabilities.... 71,571 49,406 -- 1,477 -- 2,043 1 (295) 124,203 Separate account liabilities.... 23,013 35,029 -- -- -- 26 -- -- 58,068
The Individual Business segment included an equity ownership interest in Nvest under the equity method of accounting. Nvest was included within the Asset Management segment due to the types of products and strategies employed by the entity. The Individual Business segment's equity in earnings of Nvest, which is included in net investment income, was $30 million, $48 million and $49 million for the years ended December 31, 2000, 1999 and 1998, respectively. The Individual Business segment includes $538 million (after allocating $118 million to participating F-44 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) contracts) of the gain on the sale of Nvest in 2000. As part of the GenAmerica acquisition, the Company acquired General American Life Insurance Company, the results of which are included primarily in the Individual Business segment. The Reinsurance segment includes the life reinsurance business of RGA, acquired in 2000, combined with Exeter, an ancillary life reinsurance business of the Company. Effective October 31, 2000, the Company sold Exeter to its parent, MetLife, Inc. Exeter has been reported as a component of the Individual Business segment rather than as a separate segment for periods prior to January 1, 2000 due to its immateriality. The Auto & Home segment includes the standard personal lines property and casualty insurance operations of The St. Paul Companies which were acquired in September, 1999. As part of the GenAmerica acquisition, the Company acquired Conning, the results of which are included in the Asset Management segment. The International segment includes a $87 million gain resulting from the sale of a substantial portion of the Company's Canadian operations in 1998. The Corporate segment includes a $433 million gain resulting from the sale of MetLife Capital Holdings, Inc. in 1998. Net investment income and net investment gains and losses are based upon the actual results of each segment's specifically identifiable asset portfolio. Other costs and operating costs were allocated to each of the segments based upon: (1) a review of the nature of such costs, (2) time studies analyzing the amount of employee compensation costs incurred by each segment and (3) cost estimates included in the Company's product pricing. The consolidation/elimination column includes the elimination of all intersegment amounts and the Individual Business segment's ownership interest in Nvest. The principal component of the intersegment amounts related to intersegment loans, which bore interest at rates commensurate with related borrowings. Revenues derived from any customer did not exceed 10% of consolidated revenues. Revenues from U.S. operations were $30,906 million, $24,637 million and $25,643 million for the years ended December 31, 2000, 1999 and 1998, respectively, which represented 97%, 97% and 95%, respectively, of consolidated revenues. F-45 36 PART II REPRESENTATION WITH RESPECT TO FEES AND CHARGES Metropolitan Life represents that the fees and charges deducted under the riders described in this Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life under the riders. Metropolitan Life bases its representation on its assessment of all of the facts and circumstances, including such relevant factors as: the nature and extent of such services, expenses and risks, the need for Metropolitan Life to earn a profit, the degree to which the riders include innovative features, and regulatory standards for exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. This representation applies to all riders issued pursuant to this Registration Statement, including those sold on the terms specifically described in the prospectus contained herein, or any variations therein based on supplements, amendments, endorsements or other riders to such riders or any related base policies or prospectus, or otherwise. CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. Cross-Reference Table. The Prospectus, consisting of 116 pages. Undertaking to File Reports (filed with the initial filing of this Registration Statement on November 13, 1997). Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933 (filed with the initial filing of this Registration Statement on November 13, 1997). Representation with respect to fees and charges. The signatures. Written Consents of the following persons: Independent Auditors Company Actuary (included in Exhibit 5 listed below) The following exhibits: 1.A (1) -- Resolution of Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Account UL.................................................. ++++ (2) -- Not Applicable (3) -- (a) Not Applicable -- (b) Form of Selected Broker Agreement....................... ++++ -- (c) Schedule of Sales Commissions........................... ++ (4) -- Not applicable (5) -- (a) Variable Additional Insurance Rider..................... + -- (b) L98 fixed benefit Life Insurance Policy................. ++++++ -- (c) Form of Variable Additional Benefit Rider............... +++++++ -- (d) Form of Personalized Illustrations...................... +++++++ (6) -- (a) Restated Charter and By-Laws of Metropolitan Life....... * (7) -- Not Applicable (8) -- Not Applicable (9) -- Not Applicable (10) -- Form of Application for Riders (included in Exhibits 5(a), (b), and (c) listed above)
II- 1 37 2.a. -- Opinion and consent of Christopher P. Nicholas as to the legality of the securities being registered -- For Equity Additions.......................................................... ++++++ -- For Equity Enricher........................................................... +++++++ b. -- Opinion and consent of Anne M. Goggin as to the legality of the securities being registered.............................................................. ** 3. -- Not Applicable 4. -- Not Applicable 5. -- Opinion and consent of Marian Zeldin, FSA, MAAA relating to the Equity Options....................................................................... ** 6. -- Powers of Attorney............................................................ +++++ 7. -- Method of Computing Exchange pursuant to Rule 6e-3(T)(b)(13)(v)(B) under the Investment Company Act of 1940 (not required because there will be no cash value adjustments) 8.a. -- Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii)........................................................... ++++ b. -- Addendum to Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii)........................................................... ** 27. -- Financial Data Schedule (not applicable)
- --------------- + Incorporated by reference to the filing of Pre-Effective Amendment No. 1 to this Registration Statement dated April 20, 1998. ++ Incorporated by reference from "Commissions" in the Prospectus included herein. +++ Incorporated by reference to the filing of Post-Effective Amendment No. 4 to the Registration Statement of Separate Account UL (File No. 33-57320) on March 1, 1996. ++++ Incorporated by reference to the filing of Post-Effective Amendment No. 5 to the Registration Statement of Separate Account UL (File No. 33-47927) on April 30, 1997. +++++ Incorporated by reference to the filing of Post-Effective Amendment No. 5 to the Registration Statement of Separate Account UL (File No. 33-47927) on April 30, 1997 except for Robert H. Benmosche whose power of attorney was filed with this Registration Statement on November 13, 1997, Virgina M. Wilson whose power of attorney is incorporated by reference to the filing of Pre-Effective Amendment No. 2 to the Registration Statement of Metropolitan Life Separate Account E on November 1, 1999, William C. Steere Jr.'s power of attorney which is incorporated by reference to the filing of Post-Effective Amendment No. 8 to the Registration Statement of Separate Account UL (File No. 33-57320) on April 23, 1999, and John C. Danforth's power of attorney, which is incorporated by reference to the filing of Post-Effective Amendment No. 27 of Separate Account E (File No. 33-2-90380) on April 3, 2001. ++++++ Included in the filing of this Registration Statement on November 13, 1997. +++++++ Included in the filing of this Registration Statement on April 13, 1999. * Included in the filing of Post-Effective Amendment No. 3 to this Registration Statement on April 6, 2000. ** Filed herewith.
II- 2 38 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AND THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT TO RULE 485(b) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY OF NEW YORK, STATE OF NEW YORK, THIS 6TH DAY OF APRIL, 2001. METROPOLITAN LIFE INSURANCE COMPANY (SEAL) By: /s/ GARY A. BELLER ---------------------------------- GARY A. BELLER, ESQ. SENIOR EXECUTIVE VICE-PRESIDENT & GENERAL COUNSEL Attest: /s/ CHERYL D. MARTINO ------------------------------ CHERYL D. MARTINO ASSISTANT SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board, - ----------------------------------------------------- President, and Chief ROBERT H. BENMOSCHE Executive Officer and Director (Principal Executive Officer) * Vice Chairman of the Board and - ----------------------------------------------------- Chief Investment Officer GERALD CLARK * Chairman and Chief Executive - ----------------------------------------------------- Officer (Retired) HARRY P. KAMEN * Vice-Chairman of the Board and - ----------------------------------------------------- Chief Financial Officer STEWART G. NAGLER (Principal Financial Officer) * Senior Vice-President and - ----------------------------------------------------- Controller (Principal VIRGINIA M. WILSON Accounting Officer) * Director - ----------------------------------------------------- CURTIS H. BARNETTE * Director - ----------------------------------------------------- JOAN GANZ COONEY *By /s/ CHRISTOPHER P. NICHOLAS April 6, 2001 ------------------------------------------------- CHRISTOPHER P. NICHOLAS, ESQ ATTORNEY-IN-FACT
II- 3 39
SIGNATURE TITLE DATE --------- ----- ---- * Director - ----------------------------------------------------- JOHN C. DANFORTH * Director - ----------------------------------------------------- BURTON A. DOLE, JR. * Director - ----------------------------------------------------- JAMES R. HOUGHTON * Director - ----------------------------------------------------- HELENE L. KAPLAN * Director - ----------------------------------------------------- HARRY P. KAMEN * Director - ----------------------------------------------------- CHARLES M. LEIGHTON * Director - ----------------------------------------------------- JOHN J. PHELAN, JR. * Director - ----------------------------------------------------- HUGH B. PRICE * Director - ----------------------------------------------------- ROBERT G. SCHWARTZ * Director - ----------------------------------------------------- RUTH J. SIMMONS, PH.D. * Director - ----------------------------------------------------- WILLIAM C. STEERE, JR. *By /s/ CHRISTOPHER P. NICHOLAS April 6, 2001 ------------------------------------------------- CHRISTOPHER P. NICHOLAS, ESQ. ATTORNEY-IN-FACT
II- 4 40 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT TO RULE 485(b) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED, ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, IN THE CITY OF NEW YORK, STATE OF NEW YORK THIS 6TH DAY OF APRIL, 2001. METROPOLITAN LIFE SEPARATE ACCOUNT UL (REGISTRANT) By: METROPOLITAN LIFE INSURANCE COMPANY (DEPOSITOR) (SEAL) By: /s/ GARY A. BELLER -------------------------------- GARY A. BELLER, ESQ. SENIOR EXECUTIVE VICE-PRESIDENT AND GENERAL COUNSEL Attest: /s/ CHERYL D. MARTINO ------------------------------ CHERYL D. MARTINO ASSISTANT SECRETARY II- 5 41 INDEPENDENT AUDITORS' CONSENT Metropolitan Life Insurance Company: We consent to the use in this Post-Effective Amendment No. 4 to Registration Statement No. 333-40161 of Metropolitan Life Separate Account UL on Form S-6 of our report dated March 5, 2001, relating to Metropolitan Life Separate Account UL, and our report dated February 9, 2001, relating to Metropolitan Life Insurance Company, both appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Legal, Accounting and Actuarial Matters" appearing in such Prospectus. DELOITTE & TOUCHE LLP New York, New York April 5, 2001 EX-99.2.B 2 y46215ex99-2_b.txt OPINION AND CONSENT OF ANNE M. GOGGIN 1 April 6, 2001 Metropolitan Life Separate Account UL Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Ladies and Gentlemen: In my capacity as Chief Counsel - Individual Business of Metropolitan Life Insurance Company (the "Company"), I am rendering the following opinion in connection with the filing with the Securities and Exchange Commission of an amendment to the registration statement on Form S-6 (File No. 333-40161) under the Securities Act of 1933. This Amendment to the Registration Statement is being filed with respect to individual variable additional insurance options issued by Metropolitan Life Separate Account UL (the "Account"). It is my professional opinion that: 1. The Account is a separate investment account of the Company and is validly existing pursuant to the laws of the State of New York. 2. The Equity Options, when issued in accordance with the prospectus contained in the amendment to the Registration Statement and in compliance with applicable local law, are and will be legal and binding obligations of the Company in accordance with their terms; and 3. Assets attributable to reserves and other contract liabilities and held in the Account will not be chargeable with liabilities arising out of any other business the Company may conduct. In forming this opinion, I have made such examination of law and examined such records and other documents as in my judgment are necessary and appropriate. I hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the use of my name under the caption "Legal, Accounting and Actuarial Matters" in the prospectus contained in the amendment to the Registration Statement. Very truly yours. Anne M. Goggin Chief Counsel - Individual Business EX-99.5 3 y46215ex99-5.txt OPINION AND CONSENT OF MARIAN ZELDIN, FSA, MAAA 1 Exhibit 5 Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010-3690 212 578-2211 April 6, 2001 This opinion is furnished in connection with the filing of Post-Effective Amendment No. 4 to Registration Statement No. 333-40161 on Form S-6 ("Registration Statement") which covers premiums received under the Equity Options offered by Metropolitan Life Insurance Company ("MLIC") in each State where they have been approved by appropriate State insurance authorities. As a Vice-President and Actuary of MLIC, I have reviewed the Equity Options forms and I am familiar with the Registration Statement and Exhibits thereto. In my opinion the illustrations of Equity Options death benefits, cash values and cash surrender values in Exhibit 1(A)(5)(d) included in the Registration Statement, based on the assumptions stated therein, are consistent with the provisions of the Equity Options forms. The rate structure of each Equity Options form has not been designed so as to make the relationship between premiums and benefits, as shown in these illustrations appear to be correspondingly more favorable to a prospective purchaser of the Equity Options for males age 40, than to prospective purchasers of Equity Options for a male at other ages or for a female. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Legal, Accounting and Actuarial Matters" in the Prospectus. Very truly yours, /s/ Marian Zeldin Marian Zeldin Vice-President and Actuary EX-99.8.B 4 y46215ex99-8_b.txt ADDENDUM TO MEMORANDA 1 Exhibit 8(b) Addendum to Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii) Delivery of Death Benefit Checks, If the payee has elected a lump sum payment, the check will be mailed directly to the payee. If a representative requests that the check be sent to the sales office, it should be delivered within 24 hours after it is received in the sales office. When this is not possible, the check should be mailed immediately by the sales office. -----END PRIVACY-ENHANCED MESSAGE-----